The unemployment rate fell to 8.5% in April, the lowest level since 2009, and should continue to fall to 7.9% at end-2019. Moreover, firms’ employment intentions reached their highest level since 2007 in all sectors. Job vacancies continued to rise and reached 2.1% in Q1 2018, the highest level since the 2000s, with higher tensions in the services sector (2.4%). The ongoing labor market recovery is benefit¬ing wage growth: nominal labor costs rose +2% y/y in Q1 (+1.6% on average in 2017). Mean-while, inflation is expected to peak in early summer at +2.2% as base effects from expected lower oil prices will bring it to +1.7% on average in 2018 and 2019. Hence, real purchasing power growth should stay positive which together with strong confidence and still accommodative financing conditions (until H2 2019) should remain supportive for investment and consumer spending. We expect the latter to edge up from +1.6% in 2018 to +1.7% in 2019. While more expansionary fiscal policy will support domestic demand, slower external demand should reduce GDP growth to +1.9% in 2019 from +2.1% in 2018.
