#ECB #shocks #growth #restart #year
“The latest data for the fourth quarter of 2023 indicates that growth is likely to remain moderate, while the labor market is expected to slow. Growth is expected to start recovering in early 2024, absent further shocks,” also thanks to the reduction of the effects of unfavorable financing conditions. The ECB writes it in the economic bulletin.
Furthermore, the decline in inflation should help increase real incomes and export growth should align with the improvement in foreign demand.
The ECB, which updated its economic forecasts last December, explains that “available short-term indicators suggest a continuation of the weakness in economic activity in the fourth quarter of 2023”. The “continuing contraction in manufacturing in the fourth quarter” weighs heavily, but also “a more marked slowdown in services, which had previously shown good resilience”. Furthermore, “the most recent survey data continue to point to general weakness in spending on goods” at the end of the year. Business investment, which increased in the third quarter of 2023, is also “expected to contract in the fourth”.
Investments in the residential construction sector are also falling, for which the ECB forecasts a further contraction in the short term. However, the economic expansion is expected to strengthen starting from early 2024, as real disposable income increases, supported by falling inflation, robust wage growth and stable employment, and as the dynamics of exports to improvements in foreign demand”. The impact of the tightening of rates and the unfavorable conditions of credit supply “continue to be transmitted to the economy, affecting the prospects for short-term growth”, but “these braking effects should fade away ” over the forecast horizon, supporting growth. According to the projections for the euro area published in December 2023 by Eurosystem experts, GDP should stand at 0.6% in 2023, and then rise to 0.8% in 2024 and reach 1.5% in 2025 and 2026.
Read the full article on ANSA.it
