Business surveys overstating strength of the economy

The strength of the euro-zone’s business surveys has not been matched by the official data, and with tighter restrictions being imposed for longer in many countries the level of output is likely to remain weak during Q2. We expect the region’s economic recovery to only get underway in Q3. Next week’s euro-zone retail sales and industrial production data for February will provide further evidence that output remains below “normal”, while final inflation data for March are likely to reinforce our view that underlying inflationary pressures remain largely absent.