Staff Reporter
The latest Economic Confidence (EC) survey reveals that the eurozone’s GDP is likely stagnant in the fourth quarter, with inflation pressures still hanging on, according to Capital Economics.
These findings are consistent with earlier indicators, such as the Purchasing Managers Index (PMI), which also pointed to little change in the final quarter of the year.
The survey’s Economic Sentiment Indicator (ESI) dropped from a revised 95.6 in November to 93.7 in December. This decline was sharper than both the consensus and our own predictions, which were 95.6 and 95.3, respectively. This decrease aligns with the expected stagnation in GDP for the fourth quarter.
The survey also shows a loosening labor market, with the employment expectations index dropping from 98.9 to 97.3. This decline aligns with a further slowdown in employment growth, which fell from 0.2% quarter-on-quarter in the third quarter to just above zero.
Inflation pressures continue to be a concern, according to the survey data. Expectations for selling prices among firms in the industrial and construction sectors have edged up slightly. The services selling price expectations index also rose, hitting a 10-month high and staying above pre-COVID levels.
Even with the weakness in economic activity, these survey results may heighten concerns among ECB policymakers regarding the strength of domestic price pressures.
