Eurozone Recovery: Is Europe's Economic Comeback in Jeopardy?
Recent political developments in Europe have overshadowed incoming fundamental data, as the right-wing National Rally dominates France's legislative election. But as eurozone economic releases disappoint, questions arise about the region's recovery. Has Europe's economic comeback been derailed?
Gavekal Research suggests that while demand remains subdued, the recovery is not canceled. The share of eurozone businesses citing demand as a constraint on activity has increased, but positive signs for domestic demand are on the horizon. Rising real wages and an upward trend in bank lending could support consumer spending and boost the economy.
However, concerns about fiscal policy loom large, as the EU reintroduces fiscal rules and threatens excessive deficit procedures against several key eurozone countries. The new fiscal framework is less stringent, but its impact remains uncertain.
In conclusion, while eurozone domestic demand may not see an immediate resurgence, conditions are favorable for a solid improvement by the end of the year. Investors and consumers should keep an eye on economic indicators and policy developments to navigate the evolving landscape of Europe's recovery.