The euro area expansion is expected to continue, supported in particular by favourable financing conditions, further gains in employment, rising wages and lower energy prices. In fact, bank lending rates to euro area firms and households remain close to historically low levels. The most recent bank lending survey confirms that credit standards remain favourable and loan demand continues to increase.
Together with solid earnings expectations and firms’ balance sheets, these favourable funding conditions should support business investment. Labour market dynamics remain strong, with euro area unemployment at 7.9% in December, its lowest level in more than ten years. Rising wages should continue to underpin household income and private consumption.