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The euro-zone inventory overhang has yet to unwind

Our analysis suggests that the inventory rundown underway in the euro-zone manufacturing sector has further to go and, crucially, that the pace of destocking is likely to be even greater in Q2 than in Q1. Accordingly, all we can hope for in the short term is a more modest – but still sizeable – pace of economic contraction than at the turn of the year.

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