Economic activity in the eurozone picked up again in February. According to market researcher S&P Global, this is the strongest pace in nine months. ‘These are good figures, but a lot of misery can still come our way.’
The S&P Global index, which measures overall activity in the euro area, rose to 52.3 from 50.3 a month earlier. A level of 50 or more indicates growth. The figure was better than economists had expected.
S&P Global chief economist Chris Williamson said the growth was driven by “increasing confidence as recession concerns recede and there are signs that inflation has peaked, while the industry has benefited from marked improvement in supply.” He states that prices are still at a high level, partly due to rising labor costs.
‘In the winter we still expected the economy to go into recession. That indeed seems to be the case, says Bert Colijn, economist at ING. ‘These are good figures, but a lot of misery can still come our way.’ According to the report, the economy grew slightly faster in February than in January. A recession therefore seems to be over for now, says Colijn.
According to Colijn, falling energy prices are the main relief. ‘The energy crisis is not too bad compared to where we were a few months ago.’ The fact that these prices are falling is due to the warm winter and well-filled gas reserves.
Sentiment is also much better in the services sector, which includes tourism, catering and retail, for example. Due to the weakening inflation and the recovering consumer confidence, more is being spent in the hospitality industry and on travel and leisure activities. ‘Consumers have become a little less careful’, says Colijn.
An additional factor is the improvements in the supply chain. The problems in the supply chain are rapidly decreasing and that ensures that a lot is produced. ‘The orders that have been left behind in recent times are now rolling off the production line very quickly. We’re seeing a bit of catch-up.”
However, there is also a worrying side to the good economic figures. The economy is doing better than expected, while the European Central Bank wants to slow down the economy by raising interest rates in order to combat inflation. ‘That is of course the concern you can have with this,’ says Colijn. This means that the ECB will be ‘very alert’ to developments. “On the basis of these figures, interest rates will be raised a little further.”