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Euro zone: on the way to growth?

This week’s euro zone data releases raised optimism about the state of the block’s economy and keep supporting the single currency on the levels above $1.3200. A bunch of euro zone July PMIs, released on Wednesday, surprised the markets to the upside. Euro zone’s manufacturing expanded for the first time in two years. Germany's Ifo business confidence index rose to 106.2 in July, what is its third consecutive monthly increase. Italian consumer confidence hit its highest level in more than a year in July.

However, weak demand for credit and poor state of the banking system continue to weigh on the economy, shutting out the prospects for a sustainable recovery. Loans to euro-zone businesses fell by 13B euros in June, following similar drops in April and May, data from the ECB showed Thursday. Loans to households also fell in June.

Many economists expect the euro zone Q3 economic growth to be flat or slightly up from the previous quarter. According to the ECB forecast, released in March, the economy is expected to contract by 0.6% in the year 2013. Time will show if the current signs of growth have something in common with sustainability.


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