Economic data confirms weak prospects for economic growth in EU
2023.03.06 12:19
Economic data confirms weak prospects for economic growth in EU
By Kristina Sobol
Budrigannews.com – Several indicators on Monday suggested that the euro zone’s economic recovery is tentative and fragile, adding to the indications that, even if a recession was avoided, no upturn is anticipated.
The bloc’s business morale, investment spending, and consumer confidence have been negatively impacted by rising energy prices and borrowing costs for months. Despite a dip in January, inflation remains stubbornly high, and more interest rate hikes are anticipated.
Throughout the winter, particularly, some economic readings have been better than anticipated; however, Monday’s retail trade data, a key sentiment indicator, and construction figures dampened any initial optimism.
Retail sales in the Eurozone, a good indicator of consumer demand, rebounded in January much less than anticipated, challenging other data, such as PMI surveys, which suggested a steady recovery.
Retail sales decreased 2.3% year-over-year and rose 0.3 percent on the month, falling short of economists’ 1 percent forecast.
According to ING economist Bert Colijn, this suggests “a weak start to the year for the consumer amid stubbornly high prices.” Despite the fact that surveys regarding the first quarter have been relatively positive thus far, these sales data provide little evidence that a rebound has begun.”
According to data from the previous week, inflation unexpectedly rose in February in Germany, France, and Spain—three of the top four economies in the bloc.
Sentix’s index, a key indicator of investor morale, unexpectedly fell in March for the first time since October, dragged down by a decline in expectations, adding to the negative news.
Economists had expected the index to rise to -6.3, but it actually fell to -11.1 points from -8.0 in February.
According to the survey, a current situation index increased for the fifth month in a row but remained below zero, indicating that the economy is at best in a stagnation phase.
In a statement, Sentix Managing Director Manfred Huebner said that “could soon turn into renewed recession worries if the negative economic expectations materialize.”
S&P Global (NYSE:) on Monday The euro zone Construction PMI reported somewhat encouraging developments in that industry.
However, despite the fact that the reading increased to a nine-month high of 47.6 in February from 46.1 in January, it remained below the threshold of 50, which marks expansion from contraction.
Rising borrowing costs and a growing degree of caution on the part of commercial banks, which are lending more selectively, are also holding back economic expansion and business confidence.
That will not change anytime soon.
Philip Lane, the chief economist at the European Central Bank, stated on Monday that despite a 50 basis point increase this month, the bank is still likely to continue raising rates at the fastest rate ever recorded.
In a speech in Dublin, Lane stated, “The current information on underlying inflation pressures suggests that it will be appropriate to raise rates further beyond our March meeting,” confirming market expectations for additional moves in the spring and possibly the summer.
