Standard & Poor’s says European economy to slow down in 2007

23 August 2006

Lisbon, Portugal, 23 Aug – European economic growth is likely to slow in 2007, as weaker exports to the United States and a softening of consumer demand and business investment take affect amid higher interest rates, according to analysts at international ratings agency Standard & Poor’s (S&P).

The euro exchange rate is expected to strengthen against the US dollar and other currencies, making European exports more expensive, at a time when markets will be more worried about the US current account deficits once the Federal Reserve reaches an end to its interest rate increase cycle in the United States.

After an increase of 6.5 percent in 2006, Eurozone export growth should decline to 4.5 percent in 2007, thereby slowing GDP growth, S&P economists said.

Increases in Eurozone interest rates (those that have already taken place and those that are expected to come in the coming months) may limit investment and promote savings, restricting private spending, and therefore holding back economic activity. (macauhub)