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EU cuts eurozone growth forecast

EU flags are seen outside the European Commission in Brussels, Belgium, Jan. 6, 2023.(Xinhua/Zheng Huansong/IANS)

Reflecting lower energy prices, the commission revised its inflation forecast sharply down from 3.2 percent — although it still remains above the ECB’s two-percent target…reports Asian Lite News

The forecasts by the EU’s executive arm demonstrate the impact of the European Central Bank’s interest rate-hiking campaign last year: a welcome fall in inflation, predicted to drop to 2.7 percent, but also worryingly sluggish growth, expected to reach just 0.8 percent.

Although the Frankfurt-based ECB has held rates steady so far in 2024, it is widely expected to begin cutting rates later this year in the face of slowing consumer prices and a weakening eurozone economy.

Inflation soared in the aftermath of Russia’s invasion of Ukraine in 2022, sending energy prices sky-high as Europe scrambled to find alternative power sources.

Reflecting lower energy prices, the commission revised its inflation forecast sharply down from 3.2 percent — although it still remains above the ECB’s two-percent target.

“Lower energy commodity prices, weaker economic momentum and recent inflation outturns set inflation on a lower path, lower than was anticipated last autumn,” the EU’s economy commissioner, Paolo Gentiloni, told reporters in Brussels.

The commission’s 2024 growth forecast for the 20-country eurozone, at 0.8 percent, also marks a sharp downward revision from the previous forecast of 1.2 percent.

“After narrowly avoiding a technical recession in the second half of last year, prospects for the EU economy in the first quarter of 2024 remain weak,” it said.

But Gentiloni tempered the gloomy outlook by stressing that “the conditions for a gradual acceleration of economic activity this year are still in place.”

Brussels expects growth to reach 1.5 percent next year, with Gentiloni pointing to “a strong labour market, easing inflation, rising wages, the expected gradual easing of credit conditions” as factors likely to support growth.

For now, however, EU officials consider that the eurozone is underperforming compared to the rest of the world. The United States’ full-year economic growth accelerated to 2.5 percent last year.

The reason for this, Gentiloni said, was that US consumers benefited from a larger pandemic stimulus than in Europe, adding that the bloc was also hit harder by the impact of the war in Ukraine on energy prices.

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Eurozone Inflation Bounces Back

Yearly inflation in the eurozone is still driven by the prices of food, alcohol and tobacco…reports Asian Lite News

The eurozone’s yearly inflation rate rebounded in December 2023 after a steady decline in recent months, reaching 2.9 per cent compared to 2.4 per cent in November, according to a flash estimate published by Eurostat.

Yearly inflation in the eurozone is still driven by the prices of food, alcohol and tobacco, which reached 6.1 per cent in December, compared to 6.9 per cent in the previous month, reports Xinhua news agency.

Meanwhile, yearly inflation for the cost of services remained stable, at 4 per cent, from November to December.

Non-energy industrial goods registered a yearly inflation rate of 2.5 per cent in December, down from 2.9 per cent in November.

The price of energy accounts for the rebound in the yearly inflation rate of the eurozone in December, going from -11.5 per cent in November to -6.7 per cent in December.

The highest yearly inflation rates for December were recorded in Slovakia (6.6 per cent), Croatia (5.4 per cent) and Austria (5.7 per cent).

The European Central Bank in December 2023 decided to leave its key interest rates unchanged.

Despite the recent decline of inflation in the eurozone, the bank cautioned that “while inflation has dropped in recent months, it is likely to pick up again temporarily in the near term”.

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‘Eurozone economy likely to stay weak through year-end’

Regarding inflation, Lagarde acknowledged that wages would continue to play a pivotal role in driving domestic inflation…reports Asian Lite News

Economic activity in the eurozone has stagnated in recent quarters, and is expected to remain weak for the rest of the year, President of the European Central Bank (ECB) Christine Lagarde told the European Parliament.

Lagarde attributed the slight contraction of the Eurozone’s real gross domestic product (GDP) in the third quarter to a combination of factors, including the “broadening impact of higher interest rates, weak foreign demand and the fading impetus from the reopening of the economy after the pandemic.”

However, she expressed optimism for the bloc’s economic resurgence in the coming years, citing a further decline in inflation, recovery in household incomes, and growing demand in the area.

Regarding inflation, Lagarde acknowledged that wages would continue to play a pivotal role in driving domestic inflation. Although she expected the weakening of inflationary pressures to continue, “the medium-term outlook for inflation remains surrounded by considerable uncertainty”, she said.

Concerning monetary policy, Lagarde confirmed that the ECB’s future policy rates would be set at “sufficiently restrictive levels for as long as necessary” to meet its target of bringing inflation down to 2 per cent.

“The appropriate level and duration of restriction will continue to be determined in a data-dependent manner, assessing the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission,” she said.

The ECB will ensure price stability, and support the green transition of the Eurozone’s economy, Lagarde noted.

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Eurozone slips into recession after economy shrinks 0.1%

economy.

Europe’s economy has been hit by the economic disruption caused by the Ukraine war, which has pushed up energy and food prices…reports Asian Lite News

The Eurozone has fallen into recession, new data show, as its economy contracted over the winter, according to a media report.

GDP across the Euro area shrank by 0.1 per cent in the first quarter of this year, downgraded from a previous estimate that the economy stagnated, The Guardian reported.

This follows a 0.1 per cent contraction in GDP in the fourth quarter of last year, meaning the 20-nation economy has shrunk for two quarters in a row – the standard definition of a recession, the report said.

It was dragged down by Ireland, where GDP fell by 4.6 per cent in the first quarter of this year – although economists have questioned whether that really reflects the performance of the Irish economy.

Lithuania’s economy shrank by 2.1 per cent, while the Netherlands contracted by 0.7 per cent. Germany, Europe’s largest economy, shrank by 0.3 per cent and is also in recession.

Europe’s economy has been hit by the economic disruption caused by the Ukraine war, which has pushed up energy and food prices.

That had prompted a series of interest rate hikes, as the European Central Bank tried to battle higher inflation, The Guardian reported.

Household final consumption expenditure decreased by 0.3 per cent in the Euro area during the first three months of this year, following a 1 per cent drop in the fourth quarter of 2022.

Government final consumption expenditure (which tracks government spending on goods and services) decreased by 1.6 per cent in the Euro area in January-March, The Guardian reported.

Gross fixed capital formation, which tracks investment, increased by 0.6 per cent in Q1.

But trade deteriorated. Exports decreased by 0.1 per cent in the Euro area while imports dropped by 1.3 per cent, showing that demand was hit by the cost of living squeeze.

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Eurozone falls into recession

Europe’s economy has been hit by the economic disruption caused by the Ukraine war, which has pushed up energy and food prices…reports Asian Lite News

The Eurozone has fallen into recession, new data show, as its economy contracted over the winter, according to a media report.

GDP across the Euro area shrank by 0.1 per cent in the first quarter of this year, downgraded from a previous estimate that the economy stagnated, The Guardian reported.

This follows a 0.1 per cent contraction in GDP in the fourth quarter of last year, meaning the 20-nation economy has shrunk for two quarters in a row – the standard definition of a recession, the report said.

It was dragged down by Ireland, where GDP fell by 4.6 per cent in the first quarter of this year – although economists have questioned whether that really reflects the performance of the Irish economy.

Lithuania’s economy shrank by 2.1 per cent, while the Netherlands contracted by 0.7 per cent. Germany, Europe’s largest economy, shrank by 0.3 per cent and is also in recession.

Europe’s economy has been hit by the economic disruption caused by the Ukraine war, which has pushed up energy and food prices.

That had prompted a series of interest rate hikes, as the European Central Bank tried to battle higher inflation, The Guardian reported.

Household final consumption expenditure decreased by 0.3 per cent in the Euro area during the first three months of this year, following a 1 per cent drop in the fourth quarter of 2022.

Government final consumption expenditure (which tracks government spending on goods and services) decreased by 1.6 per cent in the Euro area in January-March, The Guardian reported.

Gross fixed capital formation, which tracks investment, increased by 0.6 per cent in Q1.

But trade deteriorated. Exports decreased by 0.1 per cent in the Euro area while imports dropped by 1.3 per cent, showing that demand was hit by the cost of living squeeze.

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Eurozone inflation softens in February

People walk past a store in Berlin, Germany, on March 2, 2023. (Photo by Stefan Zeitz/Xinhua)

The Baltic countries are projected to record the highest annual inflation rates last month, with 20.1 per cent for Latvia, 17.8 per cent for Estonia and 17.2 per cent for Lithuania…reports Asian Lite News

The eurozone’s annual inflation rate is projected to fall to 8.5 per cent in February from 8.6 per cent in January, the European Union’s (EU) statistical office said in a preliminary estimate. According to Eurostat, energy price rises slowed to 13.7 per cent last month from 18.9 per cent in January.

Food, tobacco and alcohol prices rose by 15 per cent year-on-year for February, compared to 14.1 per cent the previous month. Non-energy industrial goods and services prices were also increasing.

The annual inflation rate for non-energy industrial goods is projected to reach 6.8 per cent in February, compared to 6.7 per cent in January. The respective figures for services are 4.8 per cent in February and 4.4 per cent in January.

The cost of energy has been the main driver of inflation in the eurozone since the outbreak of the Covid-19 pandemic and the war in Ukraine. Energy prices peaked in October 2022 at a record 41.5 per cent. In February this year, the year-on-year increase is projected to be 13.7 per cent.

The Baltic countries are projected to record the highest annual inflation rates last month, with 20.1 per cent for Latvia, 17.8 per cent for Estonia and 17.2 per cent for Lithuania.

Countries with the lowest year-on-year inflation in February include Belgium with 5.5 per cent, Spain with 6.1 per cent and Greece with 6.5 per cent.

“The February reading is a clear setback,” commented Bert Colijn, senior economist for the eurozone at ING. “Forward-looking indicators show that the declining trend in inflation is set to continue… Energy inflation is set to turn negative soon, possibly already in March. But the question is how fast other price categories will see declines and if inflation proves to be stickier than expected,” he said.

Food prices should continue to rise, but over the course of the year the increase should slow down, according to Colijn.

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Eurozone likely to avoid recession but Germany, Italy still at risk

EU flags are seen outside the European Commission in Brussels, Belgium, Jan. 6, 2023.(Xinhua/Zheng Huansong/IANS)

In the last three months of 2022, the 27 member countries of the EU reported an average zero growth compared to the previous quarter…reports Asian Lite News

The eurozone may end up sidestepping the risk of a recession, as the latest data released by Eurostat showed positive economic growth in the fourth quarter of 2022.

But some countries — including Germany and Italy, which represent the eurozone’s first and third largest economies respectively, are still facing recession risks.

Eurostat, the European Union (EU)’s main statistics entity, reported on Tuesday that the 19 eurozone economies grew by a modest 0.1 per cent in the fourth quarter of 2022 compared with the previous quarter. The data did not include Croatia, which became the 20th member of the euro area at the very start of this year.

As an economic recession is defined as two consecutive quarters of negative gross domestic product (GDP) growth, and economic forecasts predict European economies will pick up growth rates in the second quarter this year, this indicate the euro area could probably avoid a technical recession.

But that is not the case for all the countries. Six of eurozone countries showed negative economic growth in the fourth quarter of 2022, including Germany and Italy, whose growth declined by 0.2 per cent and 0.1 per cent respectively.

The two countries were hardest hit by the Ukraine crisis, as both have export-driven economies and depend heavily on natural gas from Russia, which has been disrupted following sanctions against Russia.

In the last three months of 2022, the 27 member countries of the EU reported an average zero growth compared to the previous quarter.

Countries across Europe suffered from high inflation caused by surging energy prices last year. Eurostat’s data showed that the inflation rate for the eurozone dipped back into single digit in December, tallying a 9.2-per cent. For the EU as a whole, the rate in December was 10.4 per cent.

The three Baltic states — Estonia, Latvia and Lithuania — where Russia’s economic influence is strong, reported the highest estimated inflation rates in January, at 18.8 per cent, 21.6 per cent and 18.4 per cent respectively.

Netherlands escapes recession

The Dutch economy grew by 0.6 per cent in the fourth quarter (Q4) of 2022, narrowly escaping a recession feared in the final months of last year, Statistics Netherlands (CBS) said on Tuesday.

Growth in Q4 was broad-based, with the trade balance and household consumption making the largest contribution. In Q3 of 2022, the economy shrank 0.2 percent and there were fears that the country would end up in a recession with another quarter of contraction.

Economic growth of 0.6 per cent in the Netherlands was higher than that in the neighboring European countries, the CBS said. In France and Belgium, economic growth was 0.1 per cent in the same period, while in Germany, the largest economy in the European Union (EU), the economy contracted by 0.2 per cent.

Citing preliminary figures, the CBS said that the country’s annual GDP growth rate for 2022 was 4.5 per cent, mainly due to higher household consumption and to improvements in the trade balance.

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Eurozone inflation hits 10.7% in October

Brussels: Flags of the European Union fly outside the EU headquarters in Brussels, Belgium, May 21, 2021. (Xinhua/Zheng Huansong/IANS)

The Baltic countries were hit the hardest by inflation, with 22.4 per cent for Estonia, 22 per cent for Lithuania and 21.8 per cent for Latvia…reports Asian Lite News

Inflation in the 19-member eurozone is expected to continue rising, hitting double digits, against the backdrop of slowing economic growth in the third quarter of 2022, Eurostat, the European Union’s (EU) statistical office, said in a flash estimate.

Driven mainly by increasing energy prices, October’s year-on-year inflation rate is expected to climb to 10.7 per cent in the eurozone, from 9.9 per cent in September.

Energy is expected to have the highest annual rate, reaching 41.9 per cent in October. The annual rate in September was 40.7 per cent.

The prices of food, alcohol and tobacco should register a yearly increase of 13.1 per cent in October, compared with 11.8 per cent in the previous month.

Non-energy industrial goods should record a year-on-year increase in the price of 6 per cent, compared to September’s 5.5 per cent; while the price of services should stay stable, going from a yearly increase of 4.3 per cent in September to 4.4 per cent in October.

The Baltic countries were hit the hardest by inflation, with 22.4 per cent for Estonia, 22 per cent for Lithuania and 21.8 per cent for Latvia.

While inflation rates are skyrocketing, the eurozone’s economic growth should continue to weaken in the third quarter of this year.

Compared with the previous quarter, Eurostat foresees a 0.2 percent growth of gross domestic product (GDP) for the third quarter of 2022 in both the eurozone and the EU.

In the previous quarter, the GDP growth figures were 0.8 per cent for the eurozone and 0.7 per cent for the EU.

Latvia, Austria and Belgium recorded negative growth of their GDP, -1.7 per cent, -0.1 per cent and -0.1 per cent, respectively.

Though the recovery of tourism in Spain or a renewed interest in investing in France are seen, this shouldn’t be enough to counter very low consumer confidence — which greatly affects retail sales — higher interest rates and an uncertain economic outlook.

Last week, the European Central Bank (ECB) increased interest rates by 75 basis points to 1.5 per cent to keep inflation in check and to bring the inflation rate closer to its two-percent target.

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Eurozone jobless rate drops to 7.9%

For both the eurozone and the EU, the rates were still higher than a year ago…reports Asian Lite News.

The 19-member eurozone’s unemployment rate fell to 7.9 per cent in May from 8.1 per cent in April, the European Union’s (EU) statistical bureau Eurostat said.

In the EU, the unemployment rate was 7.3 per cent in May, declining 0.1 percentage point over a month, Xinhua news agency quoted the bureau as saying on Thursday.

About 15,278 million people were unemployed in the EU in May, 382,000 less than in April. In the eurozone, 12,792 million people were unemployed in May, a decrease of 306,000 from April.

For both the eurozone and the EU, the rates were still higher than a year ago.

In May 2020, the unemployment rate in the eurozone stood at 7.5 per cent and in the EU at 6.9 per cent.

People wearing masks walk on the Trocadero Place near the Eiffel Tower in Paris, France (Xinhua/Gao Jing/IANS)

Greece and Spain were the countries most affected by unemployment in May, with rates reaching 15.4 per cent and 15.3 per cent, respectively.

While Germany, the Czech Republic, Poland, Malta, the Netherlands and Hungary all registered unemployment rates below 4 per cent.

The overall evolution of the unemployment rate in the eurozone and the EU has followed the development of the economic changes induced by the Covid-19 pandemic.

Unemployment rose sharply in the second quarter of 2020, when hard lockdowns were implemented.

It decreased in summer last year, as economies reopened partially; rose again in autumn during the second Covid-19 wave; and stabilised in the winter.

The decrease in unemployment in May this year corresponded to the reopening of economies as the vaccination campaigns across Europe were well underway.

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