Both the hard and soft data suggest that the activity is gathering momentum and looks set to strengthen over the course of this year. Consistent with this, all the major forecasting institutions have revised up their expectations for GDP growth in 2015 and the years ahead. We are therefore seeing the beginnings of a cyclical recovery. But it is not yet a structural one.
What I mean by this is that, though the business cycle is improving, the notable decline in euro area’s potential growth rate has not been addressed, which can be imagined as the “speed limit” of the economy – the rate at which it can grow while maintaining stable inflation.