In addition, consumption growth in the euro area has been dampened by losses in real disposable income related to past increases in consumer prices. All these factors also had a negative impact on investment. This notwithstanding, over time, the expected decline in consumer price inflation, to which the strengthening of the exchange rate has contributed, should support the growth of domestic demand.
Further positive effects on euro area economic growth should stem from the full impact of tax reductions in several euro area countries and from the fact that financing conditions in the euro area are favourable.