Economy Watch | Europe

Economy Watch: European View (February 2024)

February 22, 2024

After contracting by 0.1 percent in Q3 and stagnating in Q4, the Euro Area economy escaped a technical recession in H2 2023. Recent data suggest economic activity may be bottoming out. Business sentiment improved to a 5-month high, and consumer confidence is set to improve from February onwards given increasing real wages. Disinflation resumed in the region in January, after a spike in December. However, stickier services inflation adds an extra layer of complexity to the ECB’s monetary policy decision-making process. Nevertheless, we stay firm in our call for a first rate cut in April. All in all, we make no major changes to our monthly forecasts, expecting activity growth in the Euro Area to increase modestly in H1, before accelerating more strongly in the second half of the year.