European Economic Highlights – Will Consumer Confidence Rise Again?

Filed under: International,News,Unemployment |

Will Euro Area consumer confidence rise again?

The European economy fell for sixth consecutive quarter, contracting by 0.2% in the first quarter of 2013.

This downward trajectory seems likely to continue in the coming months as well. The differences between countries are of course large though, as the Italian and Spanish economies are still experiencing large contractions, while France has entered a recession.

Germany however has rebounded slightly from a contraction in the fourth quarter. All in all, with austerity continuing in many countries, credit constraints remaining high, and uncertainty among businesses only falling slightly, it seems that investment will remain low for the months ahead.

Another factor that is hindering a recovery is consumption.

As confidence among consumers remains low despite a recent improvement and unemployment continues to rise at already record-high levels, it seems unlikely that there will be a quick recovery in consumption in the Euro Area anytime soon.

The economy is will likely remain too weak to bring down the unemployment rate this year, resulting in continued pressure on final consumption in most European markets. However, wage increases in Germany could be a positive sign for consumption.

There, engineers in the manufacturing sector saw a wage rise of 3.4% for the year ahead. These wage increases could influence other sectoral agreements in the Euro Area’s largest economy. Even though the Germans are not traditionally large consumers, higher wages could help spur consumption and help improve the outlook for spending for the Euro Area as a whole.

Source: The Conference Board

 

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