mpc.theyserveforyou.com

mpc: 11 The growth rate of euro-area consumption was weaker than expected in Q4. Its recent sluggishness was something of a puzzle. It could not be explained easily by the behaviour of real incomes, or by wealth and the other variables usually used to explain the behaviour of consumption. One possible explanation was increased precautionary saving. That might be explained by concerns about the impact on job security of proposed structural reforms in several European countries, and about the implications of projected fiscal deficits for pension entitlements and taxes. These concerns were unlikely to disappear quickly, so consumption growth might be muted for some time. Investment growth seemed to have picked up in Q4, but that partly reflected increased residential investment in Germany, in anticipation of the removal of tax subsidies in January this year. In a longer-term perspective, the euro area seemed to have been suffering from past over-investment in some sectors such as German construction.