• Mon. May 27th, 2024

Eurozone Economic Sentiment Shows Gradual Improvement


Mar 27, 2024

Despite the gloomy outlook on European competitiveness, there are some positive signs emerging in the economy. While structural and cyclical factors are distinct, the current sentiment may be exaggerating Europe’s economic challenges. Following a period of stagnation after the energy crisis, the eurozone economy is expected to experience growth in the upcoming quarters.

The economic sentiment indicator for the eurozone has slightly increased from 95.5 to 96.3. This improvement in sentiment is widespread across industry, services, and consumer sectors. In manufacturing, there are signs of hope as the indicator for order books has shown improvement, although at low levels. With export orders following a similar trend, there is a cautious optimism for the manufacturing sector. The possible recovery in global conditions hints at a better second half of the year for production.

In the service sector, while activity remains subdued, businesses are optimistic about future outlooks. Anticipated improvements in real wages could lead to increased consumer spending on services in the latter part of the year. Service sector inflation is expected to moderate, with selling price expectations decreasing. This could be reassuring for the European Central Bank, indicating that services inflation is not accelerating.

Overall, the eurozone economy seems to be on the brink of growth. While not groundbreaking, the potential end to stagnation is encouraging. With more favorable inflation expectations for services, the ECB may consider rate cuts as early as June to support economic growth.

By editor

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