Europe: Factors contributing to the economic slowdown in the Eurozone
2024-09-04
In the eurozone, the decline in the economic surprise index indicates a more pronounced economic downturn. Although household consumption and service industry activities have shown some stability, the manufacturing industry is undergoing inventory adjustment.
The Eurozone economy is showing signs of stalling again. In February, the Eurozone Economic Surprise Index rose to the positive zone but turned negative again at the end of June. Since then, the negative value has continued to expand and has fallen to its lowest point since September last year. The current level (August 30th: -50.9) has fallen below the levels of the United States and Japan, which were previously concerned in early August. It has become the lowest level among major developed countries. This indicates that the major economic indicators of the Eurozone released in the past 30 days have been significantly lower than market expectations.
The real GDP growth rate of the Eurozone accelerated from January to March (compared to 0.3% growth in the previous period). It maintained the same growth rate from April to June (second forecast). At the beginning of 2024, the trend of declining small retail sales has been curbed and is slowly growing. This trend was previously guided by an increase in the consumer confidence index, which has been on the rise since the second half of 2022 and is currently (August: -13.5) still maintaining an upward trend. Due to rising wages and slowing inflation, real income has increased, and household consumption and consumer confidence have improved. Regarding enterprise-related indicators, the service industry production index continues to rise under the driving force of the information and communication industry, but industrial production shows a downward trend. From the data since July, both PMI and business sentiment index have remained stable in the manufacturing and service industries, while the expectations of the investor confidence index and ZEW sentiment index reflected in the outlook of financial experts have declined. Considering that the economic surprise index has decreased almost simultaneously, it can be seen that the deceleration rate of corporate activity has exceeded experts' expectations.
According to the European Commission's survey of businesses and consumers, the service industry, which led the economic recovery in the first half of 2024, maintained a high utilization rate in July (July: 90.4%), and demand for face-to-face services (such as tourism) remained robust by industry. The future focus will be whether tourism demand can continue after peak demand periods such as summer holidays and the Paris Olympics. On the other hand, the utilization rate of the manufacturing industry has decreased (July: 77.7%), and the backlog of finished product inventory is still ongoing, which may require more time to complete the adjustment. According to the author, although there were signs of economic recovery four months ago, service industry activity and household consumption contribute to financial stability, and inventory adjustments in the manufacturing industry remain the main reason for the recent economic slowdown.
The Eurozone economy is showing signs of stalling again. In February, the Eurozone Economic Surprise Index rose to the positive zone but turned negative again at the end of June. Since then, the negative value has continued to expand and has fallen to its lowest point since September last year. The current level (August 30th: -50.9) has fallen below the levels of the United States and Japan, which were previously concerned in early August. It has become the lowest level among major developed countries. This indicates that the major economic indicators of the Eurozone released in the past 30 days have been significantly lower than market expectations.
The real GDP growth rate of the Eurozone accelerated from January to March (compared to 0.3% growth in the previous period). It maintained the same growth rate from April to June (second forecast). At the beginning of 2024, the trend of declining small retail sales has been curbed and is slowly growing. This trend was previously guided by an increase in the consumer confidence index, which has been on the rise since the second half of 2022 and is currently (August: -13.5) still maintaining an upward trend. Due to rising wages and slowing inflation, real income has increased, and household consumption and consumer confidence have improved. Regarding enterprise-related indicators, the service industry production index continues to rise under the driving force of the information and communication industry, but industrial production shows a downward trend. From the data since July, both PMI and business sentiment index have remained stable in the manufacturing and service industries, while the expectations of the investor confidence index and ZEW sentiment index reflected in the outlook of financial experts have declined. Considering that the economic surprise index has decreased almost simultaneously, it can be seen that the deceleration rate of corporate activity has exceeded experts' expectations.
According to the European Commission's survey of businesses and consumers, the service industry, which led the economic recovery in the first half of 2024, maintained a high utilization rate in July (July: 90.4%), and demand for face-to-face services (such as tourism) remained robust by industry. The future focus will be whether tourism demand can continue after peak demand periods such as summer holidays and the Paris Olympics. On the other hand, the utilization rate of the manufacturing industry has decreased (July: 77.7%), and the backlog of finished product inventory is still ongoing, which may require more time to complete the adjustment. According to the author, although there were signs of economic recovery four months ago, service industry activity and household consumption contribute to financial stability, and inventory adjustments in the manufacturing industry remain the main reason for the recent economic slowdown.