Positive pointers for Eurozone economies
Recent data points to better-than-expected economic resilience across the Eurozone – with contraction in the manufacturing sector continuing to slow and a predicted fourth quarter economic contraction failing to materialise.
Although analysts continue to predict a slowdown in 2023, it looks like a recession will be avoided and a small growth seems within reach.
The S&P Global Eurozone Manufacturing PMI – which measures the performance of the manufacturing sector and is derived from surveys of thousands of businesses – was confirmed at 48.8 in January. This represents a rise from 47.8 at the end of 2022.
Although a reading below 50 indicates a contraction in the sector (with a 50+ score showing expansion), the numbers are moving in the right direction – and the 48.8 figure represents the weakest pace of contraction since August 2022.
Meanwhile, as the latest, comprehensive McKinsey Global Economics Intelligence report makes clear, other key economic indicators are also heading along an slightly more positive path.
While, according to the McKinsey report, “Inflation is only beginning to slow in the Eurozone and is still a drag on real disposable income,” it is also clear that industrial production is recovering, unemployment rates remain stable and stock markets are continuing the gains they made at the end of 2022.
Importantly, loans to businesses and household are also on the up – with loans to businesses increasing by 8.3% in 2022 compared to 2021, and the trend continuing into this year.
All of which helps explain a notably cheerful recent dispatch from the European Central Bank (also quoted in the McKinsey report) which had the confidence to assert that, in 2023:
“Economic growth is expected to rebound, supported by strengthening foreign demand and the resolution of remaining supply bottlenecks.”
