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Is the euro-zone heading for recession?

The latest surveys suggest that the euro-zone economy was still growing at a decent pace in March, but the risk of it contracting in Q2 is rising. The main event over the weekend will be the first round of France’s presidential election, after which all eyes will turn to the ECB’s policy announcement on Thursday, when policymakers will be forced to acknowledge that inflation looks set to be much higher for much longer than they previously assumed.
Jack Allen-Reynolds Senior Europe Economist
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European Data Response

Euro-zone Consumer Confidence (May)

The small increase in euro-zone consumer confidence in May left it only slightly higher than its low point at the start of the pandemic. With confidence extremely low and real incomes squeezed by high inflation, we expect a drop in household spending to cause the euro-zone economy to contract in Q2.

20 May 2022

European Economics Weekly

High inflation, record trade deficit

Data released over the past week revealed that the euro-zone recorded its first monthly current account deficit since 2012 and provided further evidence that underlying price pressures are building. We expect the latter to prompt the ECB to raise rates by 25bp, if not 50bp, in July. Next week, the PMIs and Ifo for May will provide more evidence that the euro-zone and German economies are at risk of recession. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.  

20 May 2022

European Economics Update

Historical experience highlights recession risks

History suggests that the surge in energy prices over the past year means there is a good chance that the euro-zone will suffer a recession in 2022. It also suggests that it will be tricky for the ECB to tighten monetary policy without causing a recession further ahead.

20 May 2022

More from Jack Allen-Reynolds

European Economics Update

High inflation isn’t all down to pandemic and energy

Pandemic-related effects and higher energy prices have played a significant part in pushing up inflation in the euro-zone, but domestically-generated “underlying” price pressures have increased too. That should make policymakers more confident that tighter monetary policy will soon be appropriate.

6 April 2022

European Data Response

Euro-zone Final PMIs (Mar.)

March’s final euro-zone PMI surveys confirmed that output expectations fell sharply, with Germany experiencing the biggest drop. Meanwhile, price pressures remain intense across the currency union. Drop-In: The fallout from Europe’s energy war (6th April, 10:00 EDT/15:00 BST): Join our Europe and Commodities teams for a special briefing on Wednesday, 6th April about the structure of global energy markets and the outlook for the European and Russian economies. Register here

5 April 2022

European Data Response

Euro-zone Flash HICP (Mar.)

With euro-zone inflation rising even further above the ECB’s forecast, and likely to remain very high for the rest of the year, we think it won’t be long before the Bank starts raising interest rates.

1 April 2022
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