Business climate: slightly better.
The stability of the composite PMI in February at its January level (50.2), above the level for the previous four months, points to a moderate and uncertain improvement in the economic situation. The indices for new orders and employment are deteriorating. While the manufacturing PMI rebounded (47.6 in February, +2.5 points in two months), the services PMI fell by almost 1 point in two months, although it remains in expansion territory (50.6).
Households: confidence rebounds only moderately.
Household confidence rebounded by 0.9 points over the last two months to -13.6 in February, supported by a better perception of the economic situation, households' intentions to purchase durable goods, and the outlook for unemployment. At this level, however, the confidence index remains almost 1 point below its October level, a situation explained in particular by Germany and France (where growth was negative in Q4).
Labour market: remarkable resilience.
The unemployment rate held steady at 6.2% in January, an all-time low. Declines are most marked in southern Europe and Ireland, while the unemployment rate is relatively stable in France and Germany. Negotiated wages rose by 4.1% y/y in Q4 2024, less than in Q3 (5.4% y/y) but still well ahead of inflation.
Disinflation is making moderate progress.
Inflation fell slightly in February (2.4% y/y compared with 2.5% in January). This drop is mainly due to the sharp fall in inflation in France. Core inflation is falling very gradually (2.6% y/y in February, after 2.7% in January). The ECB cut its key rate by 25 bp to 2.5% and is expected to lower it again by the same amount in April and June.
Our nowcast for Q1 2025 suggests growth of 0.2% q/q.
This estimate is identical to our growth forecast and highlights a moderate improvement in economic indicators, in line with our expectations.
Article completed on 14/03/2025
