Housing construction has been stabilized, yet at a very low level, but after a long period of decline. Confidence indicators show that growth prospects are favorable for the short term. Employment remains a problem area with double-digit unemployment, the highest level since the 40th century crisis, with the exception of the winter 1982/83.

However, unemployment has risen very sharply even though one million people have left the workforce. The labor market is however a tagged indicator which reflects past problems rather than prospects.

The economy is currently supported by strong fiscal stimulus and zero interest. In the middle of next year, the fiscal stimulus ends and interest rates are likely to be increased beginning in the fall. Businesses, however, are expected to have recovered at the time, resulting in an upturn in investment. In the U.S., capital stock has fallen which is unusual but promising an investment upturn as soon as profit levels rise and confidence is returning a bit more generally.

Households are still suffering from excessive debt and as much as one quarter of property owners have mortgages exceeding the value of their houses. This limits their scope for consumption over a long period. With a budget deficit of 10 percent of GDP, the state must have a pretty restrictive economic policy in the future, which inhibits the growth prospects.

The euro area is slow but a recovery is underway
There are clear signs of recovery in the euro area, even if it is mostly about forward-looking factors and surveys. Both companies and consumers now have a much more positive outlook than last spring, although they still are less optimistic than the average.


                                                                                         Cecilia Helland