European Economic & Investment Outlook 2024

TIME TO LIFT THE ANCHOR

Euro area GDP grew by 0.1% in Q1 and 0.2% in Q2 Q/Q of this year, with employment growth of 0.5% and 0.1% (Q/Q), respectively, during the same periods. Nevertheless, the effects of the restrictive monetary policy are now becoming more apparent, as several leading indicators are showing signs of deterioration. Early estimates reveal euro area GDP fell by 0.1% Q/Q in Q3, while employment posted a 0.3% Q/Q growth. In October, the composite Purchasing Managers Index (PMI) for the euro area dropped to its lowest point since the onset of the pandemic at 46.5, following a period of stabilisation in September. Both the manufacturing and services sectors’ PMIs declined. The Q3 GDP figures, however, did not align closely with the severity suggested by the PMI surveys. This supports our baseline view of broad stagnation across the euro area in the second half of this year. Survey data from the UK point to a slightly less favourable performance. Consequently, we anticipate the UK economy to remain stagnant until the first half of 2024, followed by a slow paced recovery. There is of course variation across countries. The German economy, which was once Europe’s driver of growth, now has the potential to tip the rest of the euro area economy into recession. Weak economic growth will persist in Germany. The German economy has been underperforming since the end of 2022, falling into a technical recession. In Q2 2023, the economy barely exited a recession with zero growth.

The European economy has been resilient despite the European Central Bank (ECB) raising rates to historic levels. The labour market has held up, and to date, a recession has been avoided. "

4 | ECONOMIC OUTLOOK 2024

THE TIDE IS TURNING TIME TO LIFT THE ANCHOR | 5