Is there a recession coming or is the Eurozone economy scraping by a hair’s breadth after all? A good question. In general (that’s how we would like to put it) it is believed to be just about to happen, and a recession can be avoided. This is because domestic consumption (services + construction) is still going so well that the marked recession in industry will not lead to a negative value for the entire economy.
The ifo Institute has recently published a forecast which was prepared together with two foreign institutes (Istat and KOF). According to the forecast, the gross domestic product in the Eurozone should have increased by 0.3% in the last quarter. It is expected to rise by 0.3% in the current quarter, and by 0.3% in the second quarter (if one compares from quarter to quarter). Cautious optimism is also seen for industrial production with -0.2% in Q4 2019. The forecast is +0.1% and +0.2% in this and the next quarter. Here are the most important statements from the ifo Institute:
The divergent development in manufacturing and the service sector continues. Survey-based indicators, however, point to an upturn in the manufacturing sector. Economic expansion is likely to pick up slightly in the forecast horizon at rates of 0.3%.
Private consumer spending is likely to remain the main driver of expansion. After a downward trend in Q4 2019, industrial production and investment activity is expected to expand again in the first half of 2020.
The inflation rate will remain low in 2019. It should accelerate somewhat in the first half of 2020.
New forecast risks arise from the conflict between the USA and Iran and the strikes in France.
However, existing risks due to the Brexit and the trade disputes between the USA and China has declined somewhat.