Eurozone economy unlikely to exceed 0.6% growth this year

Factories in the eurozone have had a dismal year, with manufacturing activity shrinking for the 18th consecutive month in December 2023.

Eurozone economy faces many difficulties.. (Source: Alamy)

The Eurozone manufacturing purchasing managers' index (PMI), compiled by S&P Global, rose to 44.4 in December from 44.2 in November, but remained far from the 50 level that separates growth from contraction in manufacturing activity.

Mr. Cyrus de la Rubia, chief economist of Hamburg Commercial Bank, commented that this weakening trend is a sign that the Gross Domestic Product (GDP) of the Eurozone may have decreased in the last quarter.

"The eurozone economy shrank by 0.1% in the third quarter, according to official figures. A second consecutive quarterly decline would mean the region's economy fell into recession," he said.

The regional economy is expected to grow just 0.6% in 2024, according to a survey of 48 economists by the Financial Times .

Experts say the Eurozone economy will not be able to exceed 0.6% growth, despite the fact that wages are expected to rise faster than inflation.

Two-thirds of respondents said they saw the eurozone economy falling into recession - usually defined as a decline in GDP for two consecutive quarters.

Wage growth in the eurozone is expected to reach just 4% in 2024, while consumer prices are forecast to rise by an average of just over 2.5% next year and a little under 2.1% in 2025, economists say.

The outlooks issued by the European Central Bank (ECB) and the International Monetary Fund (IMF) are more optimistic, as analysts from these institutions expect the bloc's economy to grow by 0.8% and 1.2% respectively in 2024.

Earlier, a December Reuters survey showed that the Eurozone would experience a mild and short recession in the winter.

The new orders sub-index rose to 42 in December from 41.5 in November, but remained below the 50-mark. The index is also in contraction territory for the full year of 2023.

In addition, the inventory sub-index showed that manufacturing activity in December focused mainly on completing old orders.

This suggests that manufacturers do not expect manufacturing activity to recover anytime soon. Factories cut jobs for the seventh straight month in December.

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