A survey conducted by Hamburg Commercial Bank (HCOB) showed that the Eurozone’s Purchasing Managers' Index (PMI) rose from 53.7 in March to 54.4 in April 2023. A PMI above 50 reflects an economic growth signal. Inflation in this area also fell from 8.5% in February, to 6.9% in March, the lowest in a year. This is much lower than the record high of 10.6% recorded in October 2022.
According to President of the European Central Bank (ECB) Christine Lagarde, inflation rates in the Eurozone are likely to fall in the coming months. In its most recent projections, the ECB said inflation in the Eurozone will average 5.3% in 2023, higher than its 2% target. After that, inflation is forecast to fall to 2.9% in 2024 and 2.1% in 2025.
Meanwhile, Director of the European Department of the International Monetary Fund (IMF) Alfred Kammer said, that the IMF has revised its economic forecast for the Eurozone up from the forecast made in January 2023, thanks to a warmer winter and decisive action by policymakers. He also expected the Eurozone’s economic growth forecast to come true this year, before accelerating further in 2024.
According to Kammer, although the European economy witnessed a sharp decline this year, most countries will avoid a recession. According to the IMF's forecast, the Eurozone will reach a growth of 0.8% in 2023, although Germany is expected to witness a mild recession.
The above indicators show that the overall positive picture of the Eurozone’s economy is still recovering, said HCOB chief economist Cyrus de la Rubia. However, the expert warned that in a deeper look, the growth is unevenly distributed. The gap between the booming services segment and the declining manufacturing segment is widening. The services sector has still recovered despite persistently high inflation in the Eurozone and people's incomes fail to keep pace with rising consumer prices.
The HCOB’s survey data also showed a sharp drop in the output of the manufacturing industry in France. Manufacturing companies said the reason for this situation is a drop in demand. According to S&P Global, in some cases, this is related to recent strikes in France. In contrast, the manufacturing sector in Germany has still recovered slightly.
The fears of a recession are easing in Europe following fears of a tough winter, due to soaring energy prices. Although the inflation rate in the Eurozone is still much higher than the target set by policymakers, consumer prices in the Eurozone countries have gradually cooled down in recent months.
The latest S&P data provides a short-term picture of the resilience of the European economy. However, the fragile expectations of businesses have assessed a sign that economic activities in the second half of 2023 may face many challenges. Although concerns about a widespread recession in Europe have eased in recent months, the IMF official warned that Europe's economic growth will slow sharply this year.
Germany is the only country that is forecast by the IMF to fall into recession. The major reason is the economic impact of the Ukraine conflict. With the economic growth forecast downgraded, Germany and the UK will be two members of the world's leading industrialised countries (G7), facing the possibility of an economic slowdown in 2023.
Positive signs of the European economy have helped maintain businesses’ confidence in the good resilience of the regional economy, despite interest rate hikes and stressful developments in the banking sector. The global stock market has experienced a series of fluctuations, but businesses still maintain optimism and overcome worries about the risk of a banking system crisis.
The fears of a recession are easing in Europe following fears of a tough winter, due to soaring energy prices. Although the inflation rate in the Eurozone is still much higher than the target set by policymakers, consumer prices in the Eurozone countries have gradually cooled down in recent months.
