Eurozone: economic indicators quarterly changes
In December 2022, according to the European Commission surveys as well as the Standard Poor's Global PMIs, the business climate improved quite significantly, surprising positively despite the accumulation of shocks. The improvement was evident in all sectors as well as in the leading sub-components (those related to new orders). However, the level of the surveys remains relatively depressed.
In December, consumer confidence continued its recovery for the third month in a row. While starting from a very low level, this improvement is nonetheless encouraging, driven by smaller concerns about unemployment and inflation.
The sharp fall in inflation in December (down around 1 point, at 9.2% year-on-year), which surprised expectations very favourably, is the most positive news in this month’s economic picture, although it should be put into perspective by the absence of a fall in core inflation. The latter actually increased further to 5.2% (+0.2 points), due to the acceleration in the prices of manufactured products and of services. However, inflationary pressures are continuing to diminish, and this should ultimately drive core inflation down.
Given the signs of resilience in the economy and core inflation, the ECB shows its determination to continue with the tightening of its monetary policy. We are now expecting policy rate increases to be extended beyond Q1, driving the terminal point a little higher (3.25% instead of 3% for the deposit rate).
Thanks to favourable surprises in a number of Q4 indicators, including in the hard data (production and consumption in November), growth prospects appear much less negative than had been feared. The supporting factors appear to be stronger (fewer supply problems, fiscal measures) and the headwinds not so severe (energy crisis less acute). According to our Nowcast estimate, Eurozone GDP is even expected to avoid a contraction and growth would be zero. We have also raised our forecast, but it remains slightly negative (-0.1% q/q instead of -0.4%).
GDP growth q/q: actual, carry-over and forecasts
Hélène Baudchon
