Global and European Setting Monthly Report – November 2024
Published on 11/19/2024
Global and European Setting Monthly Report – November 2024
1 Global economy still sluggish
The global economy remained on a moderate growth path in the third quarter of 2024. The United States was yet again its main pillar. US gross domestic product (GDP) continued to rise significantly in the third quarter after price and seasonal adjustment, while Chinese economic activity was once again anaemic, not least because of the ongoing crisis in the real estate market. In the euro area, economic output increased markedly, mainly due to one-off effects, whereas, in the United Kingdom and Japan, growth tailed off perceptibly in the third quarter.
The recent improvement in industry is unlikely to last. As in the second quarter, global industrial output rose perceptibly in the summer months, too. The Asian economies, which are highly integrated into international value chains, played a key role in this. Global trade in goods accordingly expanded even more buoyantly. Emerging and advanced economies alike again noticeably increased their exports and imports. However, frontloading effects appear to have played a role in this. In the previous quarter, companies had already restocked their inventories in the context of possible trade policy frictions and the threat of disruptions to shipping. 1 It thus remains to be seen whether the recent upswing will prove sustainable. This is also reflected by recent purchasing managers’ surveys, according to which output growth in the manufacturing sector has globally come to a standstill as of late and order books have continued to shrink. Looking ahead, political demands for new tariff barriers pose considerable additional risks to international trade.
The International Monetary Fund (IMF) also recently maintained its subdued growth outlook for the global economy and emphasised the prevalence of political risks. In the October World Economic Outlook, the IMF staff confirmed its global economic growth forecast of 3.2 % for this year. 2 This pace, moderate by longer-term standards, is expected to be broadly maintained in 2025. The staff adjusted its inflation forecast for advanced economies slightly downwards. In 2025, inflation could stabilise near monetary policy target rates. The risks to this economic outlook are assessed as being tilted to the downside, however. Not least, protectionist measures could entail significant losses in global growth.
Given the mediocre economic outlook and geopolitical tensions, commodity prices have recently been on an uneven trajectory. Crude oil prices recently declined markedly. In the first half of November, a barrel of Brent crude oil cost US$75 on average, and thus around 9 % less than in August. Demand concerns are likely to have been the main driver of this decline. The International Energy Agency estimates that there could be a distinct global oil glut next year. 3 Given the outlook of ample supplies going forward, tensions in the Middle East have only led to moderate and temporary price spikes. In contrast to oil prices, European gas prices have recently risen slightly. Seasonally rising demand, maintenance-related production losses in Norway and supply concerns are propping prices up. Prices for industrial metals and food commodities have also risen somewhat recently. The boost in demand expected in connection with China’s economic stimulus measures were a significant factor in this.
The disinflation process is continuing, but underlying price pressures are still high. In the advanced economies, the year-on-year increase in consumer prices went down to 2.4 % by October. Three months earlier, this figure stood at 2.8 %. Energy price reductions contributed significantly to this decline. Such dampening influences on inflation rates are not expected to continue over the rest of the year, and consumer price inflation is likely to be more strongly influenced again by core components (excluding energy and food). In this respect, underlying price pressures remain strong. Core inflation in the group of advanced economies stood at 3.1 % in October.
1.1 Muted economic activity in China
In China, economic growth remained muted in the third quarter. Real GDP growth continued to weaken slightly in the third quarter, slowing to 4.6 % on the year. Growth picked up somewhat over the quarter but failed to display much momentum. Private consumption, in particular, continued its slump. Nominal retail sales rose by just 2.7 % on the year. The sharp downturn in the housing market also continued. The official price index for existing dwellings, which comprises 70 large cities, fell by just under 15 % from its 2021 peak. At the same time, the floor space of new building projects declined by two-thirds. Cement production, often regarded as a barometer of construction sector activity, was almost 12 % lower in the third quarter than a year ago. Against this backdrop, it is astonishing that, according to official data, construction output is said to have contributed positively to aggregate growth throughout the reporting period. Meanwhile, consumer price trends have remained extremely subdued. In October, the headline index was only 0.3 % higher than a year earlier. Even excluding energy and food, inflation came to a near-standstill.
Exports remained a pillar of China’s economy. On average over the June to October period, revenues from goods exports (in US dollar terms) increased by just under 8 % year-on-year. In real terms, the increase appears to have even been significantly higher owing to price reductions. Against this backdrop, competitive pressure from China on international markets is likely to have intensified further, especially for advanced economies (see the supplementary information entitled "Competitive pressure from China on Germany and other advanced economies").
Supplementary information
Competitive pressure from China on Germany and other advanced economies
Chinese goods, especially tech products, have been making major inroads into global markets of late. Over the last few years, China has increasingly managed to catch up with the leading economies in the field of technology. This could partly be due to its government’s industrial policy, which has first and foremost provided targeted and large-scale backing to strategically important industrial sectors. In addition to greater performance and competitiveness, the relative post-pandemic sluggishness of domestic demand has also given China’s industrial sector a key incentive to focus more on foreign markets. Overall, China has gained significant global market share for many high-tech products, in particular, and has continued to expand its position as the world's leading exporter. At last count, just under 15 % of global goods exports came from China.
Given this surge in exports, China is probably exerting significantly more competitive pressure on the advanced economies. The boom in China’s exports after it joined the World Trade Organization (WTO) in 2001 was fuelled primarily by labour-intensive products such as textiles and, for the advanced economies, was mainly associated with an increase in imports from China. By contrast, China’s latest advance is likely to encroach more on core industries in the advanced economies and cause them large losses in export markets. As a result, some observers are already talking about a “China shock 2.0”. 1
To model the development of competitive pressure from China on the export economies of specific countries, we use our own indicator, which consolidates granular foreign trade data. 2 The analysis incorporates highly granular foreign trade data 3 from around 100 countries since 2011. In order to calculate competitive pressure from China for a given country, we weight China’s share of global exports in each product category by that category’s share of the respective country's total exports. 4 The indicator points to high competitive pressure whenever China holds large global market shares in particularly significant export sectors of a given country. It thus complements the price competitiveness indicators that the Bundesbank calculates, which incorporate macroeconomic relative price and productivity levels, taking into account the importance of the respective regional trade structure. 5
According to the analysis, competitive pressure from China has increased significantly in recent years, especially on Germany. The competitiveness indicator calculated in this way for Germany rose from just under 9 % in 2011 to 13 % in 2021, where it has remained since then. This means that China’s global market share in the sectors relevant to the German export industry increased by just over 4 percentage points on a weighted average. In the other G7 countries, this increase was less pronounced. However, measured by the most recent indicator a number of countries were exposed to significantly greater competitive pressure from China than Germany. These included several Asian economies such as Taiwan and South Korea, as well as a number of Eastern European countries including Poland and Czechia. Conversely, competition with China was less intense for countries such as the United States and Canada because the latter also export various commodities and agricultural goods that barely feature among China’s range of exports.
The automotive sector, amongst others, has recently added to mounting competitive pressure from China on Germany. This reflects the fact that Chinese exporters increased their global market share in this sector, which is very important for Germany, from 4 % in 2017 to just over 10 % in 2023. 6 China’s significant gains in market share in mechanical engineering and chemical products also contributed to more intense competition. That said, China’s global market shares have not changed significantly in recent years in other sectors that are significant for Germany, such as pharmaceutical products.
Competitive pressure from China on Germany and other advanced economies is set to intensify further over the next few years. China’s market shares in many high-tech sectors such as aviation are still comparatively low at present, and the country's leaders continue to pursue an extremely active industrial policy. In the automotive sector, in particular, there is much to suggest that Chinese firms are only just preparing to make the leap. 7
The Chinese authorities have recently launched extensive monetary and fiscal policy measures in order to jump-start domestic demand and mitigate financial risk. The Chinese central bank recently adopted a series of expansionary monetary policy measures, including cuts in policy rates and the minimum reserve rate. The government also announced further measures to support the real estate sector. In early November, it also unveiled a large debt restructuring programme with a view to reducing local governments’ piles of off-balance-sheet debt.
1.2 Mixed developments in other emerging market economies
In India, economic activity may have continued to cool off recently. Annual GDP growth had already slowed markedly to 6.7 % in the second quarter of 2024. Recent monthly indicators are pointing to a further deceleration, with the business climate deteriorating markedly, particularly in the services sector. Consumer price inflation rose markedly to 6.2 % in October, due primarily to a surge in food prices.This put the inflation rate somewhat outside the central bank’s target corridor. The central bank had previously left its policy rate unchanged at 6.5 %.
Brazil’s economy still seems to be riding high. Real GDP had already grown surprisingly strongly in the first half of 2024; it was up by 3.3 % on the year in the second quarter. The upswing was broad-based, also supported by expansionary fiscal policy. The latest indicators continue to point to a vigorous expansion. However, this could also lead to a resurgence in inflation. Inflation rose markedly in recent months to 4.8 % in October. Against this backdrop, the central bank raised its policy rate by a total of 75 basis points to 11.25 % in September and October, bucking the global trend.
In Russia, economic growth weakened markedly amid increasing supply-side bottlenecks. According to data from Rosstat, real GDP growth declined in the third quarter of 2024 to 3.1 % on the year, compared with 4.1 % a quarter earlier. The tight labour market, in particular, is likely to have dragged down growth. The unemployment rate held steady at the historically low level of 2.4 %. Against this backdrop, wage growth stayed extremely strong, while the government maintained its accommodative fiscal policy stance. All in all, the risks of an overheating economy are still high. Annual consumer price inflation continued to accelerate, reaching 8.9 % in the third quarter. This prompted the central bank to further tighten its monetary policy reins sharply. Since September, it has hiked its policy rate by a total of 300 basis points to 21 %.
1.3 USA still in midst of an upswing
In the United States, economic growth remained buoyant in the summer months. According to initial estimates, seasonally and price-adjusted GDP rose once again by 0.7 % on the quarter in the third quarter. Households remained in a purchasing mood and sharply increased their consumer expenditure. Government demand showed similar dynamics. At the same time, firms continued to significantly expand their investment in machinery and equipment. Only construction investment saw a setback, with financing conditions remaining unfavourable. 4 Exports likewise flourished. Frontloading effects could well have been at play here given the threat, at times, of strikes at major US ports. Imports increased even more strongly than exports, against the background of very brisk final demand across the board.
The short-term outlook for the US economy is also quite favourable. This applies, not least, to consumption. After a distinct upward revision of disposable income in the annual revision of the macroeconomic accounts, consumers appear to have greater scope for spending than previously assumed. They are therefore also likely to be able to cope if the labour market continues to slow down. There are still no signs of a drastic deterioration in the labour market situation (see the supplementary information entitled “On the economic implications of the US labour market slowdown”). Employment growth continued at a slower pace in October, despite impairments caused by hurricanes and labour disputes in the aviation industry. The unemployment rate remained low. Early sentiment indicators confirm that the US economy has gotten the final quarter of the year off to a good start. Moreover, the possibility of deregulation initiatives by the incoming US administration and the prospect of tax cuts could prop up sentiment in the corporate sector. On the other hand, the trade and immigration policy proposals pose considerable downside risks.
Given the booming economy, it remains to be seen whether the disinflation process will progress rapidly. In October, the year-on-year rate of the consumer price index even rose slightly to 2.6 %. The core rate remained at 3.3 %, particularly as a result of persistently high services price inflation. In the light of these developments, the US Federal Reserve refrained from another major interest rate move in November, lowering the fed funds target range by only 25 basis points to between 4.5 % and 4.75 %.
Supplementary information
On the economic implications of the US labour market slowdown
Signs of deterioration in the labour market in the United States caused widespread economic concerns in the middle of the year. Financial markets, in particular, reacted nervously to data releases perceived as disappointing. Indeed, employment growth slowed markedly for a while, and the unemployment rate rose to 4.2 % on average between June and August. A year earlier, it had been just over ½ percentage point lower. An increase of this size in the unemployment rate has in the past been a fairly reliable indicator of a downturn in the economy as a whole. The Sahm rule, named after its inventor, produces a warning signal for every recession dated by the National Bureau of Economic Research since 1965. Only once – in 1976 – does it produce what turns out to be a false alarm (see Chart 1.7). 1
Overall, however, the labour market in the United States remains in good shape. The recent cooling-off comes on the heels of a period of extremely high utilisation. Enterprises had great difficulty filling jobs, particularly during the economic recovery from the pandemic. In mid-2022, up to two job vacancies per unemployed person were recorded. Since then, the labour market has returned to a better balance, particularly as a result of an increase in the labour supply. This was due in part to strong immigration, which also supported economic growth. 2 The rise in the unemployment rate also largely reflects this increase in the potential labour force. By contrast, there was no wave of layoffs typical of an economic downturn. The number of employed persons of normal working age continued its upward trend. This contrasts with the employment losses in the context of earlier warning signals under the Sahm rule (see Chart 1.8, left panel).
The robust shape of the US economy extends beyond the labour market. In the third quarter, real GDP in the United States rose by 0.7 % on the quarter in seasonally and price-adjusted terms. The pace of growth was actually slightly faster than in the first half of the year. Many other indicators – including those used by the National Bureau of Economic Research to date economic cycles – confirm a picture of an economic situation that is more than solid. 3 Accordingly, an econometric model based on this broader set of data classifies the probability that the US economy is currently in a recession as negligible. 4 In the past, however, it has mostly indicated an increased downturn risk earlier than the Sahm rule (see Chart 1.8, right panel). In fact, earlier signals from the Sahm rule often occurred in phases in which the US economy was already in recession from today’s perspective. Then again, the rule was not designed as a leading indicator of emerging economic risks. 5 All in all, this latest signal should not be taken as having a high level of forecasting power for the short-term macroeconomic outlook.
Ultimately, there is little cause for greater concern about an imminent recession in the United States at present. Initial sentiment indicators were also favourable at the beginning of the final quarter. Recent signals from the labour market confirm this picture. Wage and employment growth continued despite hurricanes and labour disputes. The unemployment rate has also gone back down since August. In October, there were therefore no further warning signals under the Sahm rule. This means that there is still much to suggest a “soft landing” for the US economy. However, some risks to this outlook remain – not least on the political side. For example, a tough immigration policy could curb both economic and employment growth. 6
1.4 Subdued growth in Japan
Japan’s economic output increased slightly in the third quarter. According to initial estimates, GDP grew by 0.2 % in seasonally and price-adjusted terms. The economic recovery thus slowed down perceptibly. One reason for this was interruptions to production in the manufacturing sector caused in part by inclement weather. 5 Industrial investment accordingly declined somewhat, and exports expanded only moderately. By contrast, imports continued to grow markedly. Private consumption also remained lively, buoyed by strong wage growth. The labour market situation continued to be favourable. The unemployment rate stood at 2.4 % in September, close to its all-time low. Inflation weakened somewhat, but remained high by Japanese standards. In September, consumer prices were up by 2.5 % year-on-year. Excluding energy and food, this figure stood at 1.7 %. The Japanese central bank left its policy rate unchanged at 0.25 % in October.
1.5 Growth in the United Kingdom perceptibly lost pace
The UK economy expanded far less vigorously in the third quarter than in the first half of the year. According to initial estimates, GDP went up by 0.1 % in seasonally and price-adjusted terms compared with the fourth quarter. Business activity in the services sector, which holds a key position in the country’s economy, was unable to maintain the quite strong growth recorded in the first half of the year and expanded only slightly in the third quarter. By contrast, construction activity rose considerably after having declined in the three preceding quarters. Production in the manufacturing sector expanded somewhat. Labour market tensions eased given the macroeconomic slowdown. The number of vacancies declined throughout the reporting period, which appears to have contributed to a distinct reduction in annual wage growth to 4.2 % at the end of the period under review. The annual Harmonised Index of Consumer Prices (HICP) rate fell further to 1.7 % in September, and the core rate also dropped slightly to 3.2 %. Against this backdrop, the Bank of England cut its policy rate in early November by 25 basis points to 4.75 %.
1.6 Polish economic activity cooling off
In Poland, economic activity cooled off significantly in the third quarter following a strong first half. Real GDP contracted by 0.2 % on the quarter in seasonally adjusted terms, following an average increase of 0.9 % in the first two quarters. The decline is probably due in part to the impact of floods in September. While services sector activity continued to expand quite strongly in the third quarter, production of intermediate and capital goods fell markedly. Private consumption was adversely affected when support measures that had capped the prices households paid for energy expired towards the middle of the year. The inflation rate consequently rose from 2.6 % in June to 4.9 % in September. This was a drag on households’ purchasing power, although gross wages in the corporate sector continued to go up, increasing by just over 10 % year-on-year. Retail sales thus rose only moderately after price adjustment. Investment activity seems to have expanded once again, supported by payments from the NGEU Fund, whereas construction output fell anew. The unemployment rate rose slightly to 2.9 %. The National Bank of Poland left its policy rate unchanged at 5.75 %.
2 Moderate upward trend in euro area economic activity
The euro area economy expanded perceptibly in the third quarter of 2024. According to Eurostat’s flash estimate, GDP rose by 0.4 % on the quarter after price and seasonal adjustment. Excluding Ireland, the rise was by 0.3 %. Various services sectors expanded strongly, supported in part by temporary one-off effects such as the Olympic Games in France. Private consumption continued to recover, while manufacturing and construction remained mired in a slump. Overall, the underlying cyclical trend continued to point moderately upward. Moreover, leading indicators do not yet indicate any trend change. According to surveys, although consumption continued to brighten, the outlook for industry has deteriorated further. The moderately expanding global economy is likely to provide only a small stimulus for the euro area, not least because of the persistently weak competitiveness plaguing some areas of European industry. The many international conflicts, uncertainty about global trade policy and the reform gridlock in several Member States also stand in the way of a sustained uptick in economic growth.
Consumption has firmed. Retail sales grew considerably in price-adjusted terms. Expenditure on services probably continued to rise, especially in the hospitality sector. By contrast, the number of new motor vehicle registrations declined considerably. This is likely to have been driven by consumer uncertainty about future environmental requirements for internal combustion vehicles and further support for purchases of hybrid or electric vehicles. Household incomes have improved once again. Purchasing power is likely to have risen significantly again as a result of the sharp rise in wage income and diminishing inflation. Consumer confidence continued to improve and nearly returned to its long-term average. However, according to surveys, the propensity to save remained high throughout the reporting period. The high savings ratio by longer-term standards was due not only to high interest rates, real wealth losses resulting from the surge in inflation, as well as the wait-and-see attitude towards car purchases, but also increased demand for hedges against economic shocks.
Investment activity probably declined once again. 6 Construction investment is likely to have fallen once again in the third quarter. Overall, the decline in construction output in July and August combined was less than in the previous quarter. However, the slump has now reached all sectors (building construction, civil engineering and the finishing trades). Investment in machinery and equipment also appears to be continuing to sag. Capital goods producers’ domestic sales, after price adjustment, decreased once again in July and August. By contrast, expenditure on information and communication technologies (ICT) and on intellectual property products is likely to have risen further as the trend to go digital continued.
Exports of goods to non-euro area countries are unlikely to have seen any increase. Exports of capital goods and intermediate inputs stagnated at the beginning of the quarter in price-adjusted terms, and exports of consumer goods contracted. Looking at individual destination countries, exports to China, in particular, are likely to have fallen significantly in terms of value in the third quarter, but those to the United Kingdom probably fell slightly as well. Exports to the United States appear to have markedly lost steam. According to provisional balance of payments data, euro area services exports fell for July and August, even though the hospitality sector production index appears to indicate that tourism has remained buoyant. Imports of goods from non-euro area countries rose again in price-adjusted terms in the third quarter, but probably at a somewhat slower pace. Those of capital goods and consumer goods alike are likely to have increased by a smaller amount than in the previous quarter. Imports of intermediate goods probably fell slightly.
The manufacturing sector remained stuck in a slump. Intermediate input production, in particular, fell markedly in the third quarter, as in the previous quarter. In addition, capital goods production declined slightly. By contrast, consumer goods production increased. On the whole, industrial production went down. In addition, industrial capacity utilisation fell further below its long-term average. In addition to subdued investment activity in the euro area, weak international competitiveness remains a burden. European Commission survey indicators of competitiveness have deteriorated throughout the reporting period. By contrast, producer price pressures have remained low. Producer and import prices for intermediate inputs continued to decline year-on-year, but were somewhat higher than at the beginning of the year. For finished products, annual price increases diminished further.
Many services sectors remain on a growth path. Business activity in the hotel and restaurant sector, in particular, is also likely to have increased due to buoyant tourism. In addition, the activities of business-related service providers as well as those in the ICT sector probably continued to grow markedly. According to European Commission surveys, however, a shortage of labour continues to weigh on the services sector. The importance of insufficient demand as a factor limiting production increased somewhat in recent quarters, but remained below the long-term average.
Economic output rose in most Member States in the third quarter. The pace of economic growth continues to differ considerably between countries. In some countries with persistently favourable labour markets and low inflation, household consumption rose quite significantly. Buoyant tourism supported activity, especially in the southern Member States. The dampening effects of weakness in manufacturing were noticeable in Germany, in particular.
In France, economic output rose markedly. According to preliminary estimates, real GDP increased by 0.4 % in the third quarter. The Olympics and Paralympics were a major driver of growth. 7 Private consumption, in particular, benefited. Services also saw considerably increased revenue from broadcast rights and ticket sales. The underlying cyclical dynamics remained weak, though. Investment in construction and in machinery and equipment declined once again, whilst exports of goods and services fell markedly.
In Italy, the economic recovery has stalled. According to preliminary estimates, real GDP stagnated in the third quarter following growth of 0.2 % in the previous quarter. Private consumption, which benefited from the increase in purchasing power, has probably provided a renewed slight boost. In addition, investment activity is likely to have recovered somewhat. By contrast, goods exports probably continued to fall, which also reflects the persistent weakness of Italian industry. As in the previous quarters, its output declined. By contrast, service providers’ activity rose.
Spain’s strong upswing continued. According to an initial estimate, real GDP grew by 0.8 % in the third quarter, thus remaining extremely dynamic. The recent growth was driven by an increase in private consumption, whereas investment slowed down. Exports and imports alike rose markedly. On the supply side, manufacturing output increased; that of services was even up significantly. By contrast, activity in the construction sector declined.
Economic output rose markedly in most of the smaller Member States as well. In the Netherlands, real GDP has gone up perceptibly for the second time in a row, an apparent indication that the slump has been overcome. In Austria and Finland, too, activity increased again in the third quarter. In Ireland, Lithuania and Cyprus, real GDP once again rose significantly. It increased moderately in Belgium, Portugal, Slovakia and Slovenia. In Latvia, activity went down once again.
The labour market situation deteriorated slightly in the third quarter. The unemployment rate remained at its low of 6.3 % and the number of persons in employment once again rose slightly. Employment expectations, however, have been declining since March of this year and, for some months now, have already been under the long-term average. The job vacancy rate showed another marked drop, and labour hoarding fell. Wage growth is likely to once again have been comparatively high in the third quarter, standing at between 4 % and 5 % on the year. Wage growth is thus unlikely to moderate significantly in the second half of 2024.
Overall, consumer prices continued to rise moderately in the third quarter, despite declining energy prices. As measured by the HICP, prices increased by 0.5 % compared with the previous quarter after seasonal adjustment. Services inflation remained strong. Surging wage growth had a particularly strong impact here. Food prices likewise rose significantly, reflecting in part high food commodity prices caused, amongst other things, by bad weather at the end of the quarter. Non-energy industrial goods also became more expensive again following a quarter in which upward price pressures had ground to a complete halt. By contrast, energy prices fell significantly, not least because of lower crude oil prices.
On an annual basis, upward price pressures continued to decline. The inflation rate fell from 2.5 % to 2.2 % in the third quarter, with the disparity between goods and services continuing. Services inflation has remained stuck at around 4 % since the end of 2023. By contrast, the price dynamics of goods continued to cool off. For energy, they were even significantly negative. However, upward price pressures for food and non-energy industrial goods eased somewhat, too. For the latter, inflation was even slightly below its pre-crisis average. This underlines the general assessment that the disinflation process for non-energy industrial goods is likely to be largely complete, partly because producer prices for these goods did not fall any further up until the end of the reporting period.
As expected, inflation went back up markedly in October. According to Eurostat’s flash estimate, it rose from 1.7 % in September to 2.0 % in October. Food prices, in particular, rose more strongly than before. The year-on-year decline in energy prices narrowed, in part because crude oil prices had fallen in October 2023. Non-energy industrial goods inflation remained weak and services inflation remained high. The core rate therefore held steady at 2.7 %. In the coming months, the inflation rate is expected to go back up temporarily due to base effects from energy before then gradually falling over the course of next year.
A slowdown in economic growth appears to be on the cards for the current quarter. The factors that had temporarily stimulated economic activity in the third quarter have now faded out. All else being equal, this will already reduce GDP growth in the fourth quarter. In addition, there is no end in sight yet to industry’s slump. According to both the Purchasing Managers’ Index for the manufacturing sector and the European Commission’s Economic Sentiment Indicator, output expectations in October remained markedly in contractionary territory or below their long-term average. In addition, new orders, especially from abroad, continued to decline. An imminent turnaround is likely to be hampered by various factors, including the persistently mediocre competitiveness of euro area industrial enterprises and a slowdown in global industrial activity. There are no signs of any noticeable increase in activity in the construction sector, either. According to surveys, order books in that sector have improved only slightly throughout the reporting period. By contrast, service providers’ activity is likely to expand moderately. Admittedly, the outlook in some services sectors has recently deteriorated somewhat; however, the firming of private consumption is likely to stimulate trade. In addition, the ongoing trend towards digitalisation is supporting activity in the field of ICT services and various business-related services. Against this backdrop, euro area economic activity is likely to remain on a moderate upward path.
National Bureau of Economic Research (2024), Business Cycle Dating, accessed on 10 October 2024.
Sahm, C. (2019), Direct Stimulus Payments to Individuals, in H. Boushey, R. Nunn. and J. Shambaugh (eds.), Recession Ready: Fiscal Policies to Stabilize the American Economy, Brookings, pp. 67‑92.
