The key euro-zone surveys of activity and sentiment continued to pick up in Q1, particularly in the periphery, suggesting that GDP growth in the region as a whole may have been a bit stronger than in Q4. What’s more, January’s solid monthly rises in retail sales and exports provide some hope that any strengthening of the recovery may have been fairly broad based. But the euro-zone recovery still looks set to be pretty lacklustre and the strong euro and banks’ continued unwillingness to lend do not bode well for GDP growth over the remainder of the year either. Accordingly, deflationary forces may continue to build.
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