European Economic Highlights
Labor Market Economist
10 Mar. 2014
By Klaas de Vries and Bert Colijn
The economic recovery of the Euro Area remains moderate, with modest GDP growth over the previous quarters and continuing high unemployment rates. This week saw the release of the first monthly retail sales figures for 2014, which showed an increase of 1.6% over December 2013. The level of retail trade is currently still well below pre-crisis levels, which is not surprising given high unemployment, deleveraging by households and low wage growth. Even though these factors are holding the outlook for consumption back, factors like the increasing consumer confidence during the last couple of months can provide an upside to consumer demand in the first months of 2014.
While the consumer has not increased spending considerably over the past months, we have seen improvements in economic activity in some parts of the economy. According to the Purchasing Manager Index for the Euro Area, output in the economy further increased through February, as their index increased from 52.9 in January to 53.3, which hints at faster growth in the economy. France continues to struggle to improve its economic conditions, as its PMI continues to signal contraction. Even though French GDP expanded in the last quarter of 2013, it does not seem that the recovery of economic activity is gaining strength in the first months of the year.
This week will see the release of European industrial production data for January. It will be interesting to see whether the improvements in the European Commission Business Climate Indicator and the Euro Area PMI for Manufacturing will be translated into a further increase in industrial production. The indicator has been slightly trending upwards since the end of 2012 and strong growth of industrial production in January though might be an indicator of improving GDP growth in the first quarter of 2014. Another closely watched release this week is Euro Area employment in the fourth quarter of 2013. Employment growth has been negative for eight consecutive quarters and flattened in the third quarter of 2013. Employment growth usually lags output, so following the 0.4% growth of GDP in the fourth quarter it will be interesting to see whether this growth has created more jobs as well. This would be a positive sign for the recovery of the economy.