The Euro-Area Recovery, in Five Charts

  • Euro-area economy forecast to have grown 0.5% in first quarter
  • ECB president says economy becoming ‘increasingly solid’

ECB's Draghi Says Recovery Is Solid and Broad

In the eyes of Mario Draghi, “fragile and uneven” is a thing of the past.

“Solid and broad” is how the European Central Bank president now characterizes the euro-area recovery, with a host of numbers ranging from manufacturing to employment constituting evidence that “things are going better.”

Gross domestic product data for the first quarter are due to be published Wednesday, and economists predict an increase of 0.5 percent from the previous three months. Reports from France and Spain gave mixed messages last week, with growth in the former slightly weaker than anticipated and the latter beating forecasts. Germany and Italy will report later in May.

Unemployment is steadily declining from a peak of more than 12 percent in 2013, with improvements also visible in crisis-hit countries such as Spain. The region’s jobless rate remained at 9.5 percent in March, according to a Eurostat report published Tuesday. Economists had predicted a drop to 9.4 percent.

Draghi said last week that “virtually all” the job losses during the crisis had been offset by hiring in the past 3 1/2 years.

Better chances of finding a job make consumers more willing to spend. Euro-area economic confidence hit its highest in a decade in April, and an index of consumer sentiment is within striking distance of its strongest reading since before the financial crisis. While shoppers in Germany, France and Spain are increasingly upbeat, Italians feel that the benefits from brighter economic prospects have been scarce.

Consumption-driven demand is good news for companies too. Momentum in euro-area manufacturing and services accelerated to its fastest pace in six years in April as firms increased operating capacity to meet buoyant demand, according to preliminary survey results from IHS Markit.

To be sure, not all is perfect. Before a report on Friday showed core inflation at the strongest in almost four years, the ECB cautioned that price growth still lacks a convincing upward trend. At the same time, some economists have argued that the recent spate of positive numbers overstates the strength of the recovery. 

French politics remain a risk even after the outcome of the first round of presidential elections reduced the chance that a euro skeptic would succeed Francois Hollande. Britain’s departure from the European Union, protectionist policies in the U.S. and negative surprises from emerging markets could also still cause economic pain.

In Draghi’s words: “The risks surrounding the euro-area growth outlook, while moving towards a more balanced configuration, are still tilted to the downside and relate predominantly to global factors.”

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