Euro Area Autumn 2023: The growth engine slows down temporarily

The economic outlook in the monetary union has recently become more clouded. After a meagre expansion of economic output in the first half of the year, leading indicators increasingly paint a gloomy picture. Although consumer confidence has continued to recover, firms have recently been far less confident than they were a few months ago. Business sentiment of manufacturing firms is particularly poor. However, these negative trends of economic sentiment are unlikely to persist. With energy prices largely back to normal, rising real incomes and increasing support from the global economy, the euro area is expected to gain grip. Nevertheless, economic momentum will likely remain subdued as monetary policy will be eased rather cautiously. Overall, GDP is expected to increase by 0.6 percent in the current year, followed by 1.4 percent (2024) and 1.7 percent (2025). Inflation, which was still high recently, will continue to ease. Consumer prices will probably increase by an average of 5.6 percent in the current year, but looking ahead, inflation is likely to be significantly lower at 2.6 percent (2024) and 2.2 percent (2025). The unemployment rate will remain low.