The European economic upturn still appears to have considerable momentum. The one piece of the jigsaw still missing is a significant pick-up in activity in the consumer sector. With growing signs that the industrial sector is losing a little steam, there is a danger that the overall recovery will slow unless households soon start to loosen their belts. But with unemployment at historically low levels and consumer confidence very buoyant, the conditions are in place for stronger spending to underpin GDP growth in the euro-zone of a very solid 3% or so this year. Although inflation pressures in the region remain relatively subdued, the strength of activity should keep the ECB and other central banks in tightening mode for a while longer, supporting European bond yields and currencies.
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