Consumer confidence within the eurozone improved for the fifth consecutive month, reflecting optimism that the bloc’s financial system might endure at worst solely a light recession regardless of the vitality disaster attributable to the Ukraine warfare.
The European Commission mentioned the flash estimate of its shopper confidence indicator for February, based mostly on a survey of about 32,000 folks throughout the area, was up 1.7 factors to minus 19. That was its highest stage for a yr, although it remained beneath pre-pandemic ranges and the long-term common and economists warned that the bloc’s financial system nonetheless faces a number of challenges.
Sentiment amongst European shoppers has been buoyed by the comparatively delicate winter, which helped to cut back vitality consumption, boosted gasoline storage ranges and allayed fears of potential shortages.
European wholesale gasoline costs have fallen to their lowest stage since earlier than Russia launched its full-scale invasion of Ukraine a yr in the past, growing hopes that eurozone inflation will proceed to fall after hitting a report excessive above 10 per cent in October.
Governments have additionally offered giant subsidies to help jobs and restrict the hit to disposable incomes from excessive vitality costs, whereas wage progress in a lot of Europe has greater than doubled to virtually 5 per cent previously yr.
“A key support to consumer sentiment in 2022 was the strength of the labour market, and our sentiment indicators suggest this is set to continue at least in the short term,” mentioned Innes McFee, an economist at analysis group Oxford Economics.
Eurozone unemployment fell to a report low of 6.6 per cent in December. However, inside this, McFee mentioned there have been indicators of job markets in Germany and Italy “softening quickly” as a result of influence of the vitality disaster, although France, Spain and the Netherlands have been nonetheless “broadly stable”.
Although the European financial system has proved extra resilient than anticipated to the inflationary pressures attributable to Russia’s invasion of Ukraine, there are different indicators of deteriorating circumstances within the 20-member foreign money bloc. The variety of chapter filings by EU companies rose sharply within the fourth quarter to their highest stage since information started in 2015, lifted by a flurry of latest circumstances in Spain.
Building exercise seems to have been an early sufferer of rising financing prices and falling home costs, as revealed by official EU information revealed on Monday, which confirmed manufacturing within the eurozone development sector fell 2.5 per cent from November to December, taking it again beneath pre-pandemic month-to-month ranges.
George Buckley, an economist in London at Japanese financial institution Nomura, mentioned shopper and enterprise surveys had “overstated the negative growth outlook” this winter, with the eurozone financial system defying recession fears by rising 0.1 per cent within the fourth quarter.
“The question now, however, is whether they [the surveys] are overstating the near-term positive growth outlook,” he mentioned, declaring that the current 3 share factors of rate of interest will increase by the European Central Bank had created the hardest financing circumstances for a decade.
Nomura forecast increased borrowing prices would drag the eurozone financial system right into a recession later this yr, though it could be comparatively quick and delicate — lasting three quarters and dragging output down 0.7 per cent from peak to trough.