Take Two: Eurozone growth forecast revised up, Japan GDP beats expectations
- 22 May 2023 (3 min read)
What do you need to know?
The Eurozone economy is expected to grow faster than previously anticipated thanks to lower energy prices, fewer supply chain pressures and a strong labour market, the European Commission said. It raised its growth forecast for the bloc to 1.1% this year and 1.6% next, from the 0.9% and 1.5% growth predicted in February. It did however also raise its inflation forecast to 5.8% for this year and 2.8% next from 5.6% and 2.5% respectively. Official data confirmed Eurozone annual inflation accelerated slightly to 7.0% in April compared to 6.9% a month earlier, while core inflation excluding energy, food, alcohol and tobacco slowed to 5.6% from 5.7%.
Around the world
Japan’s faster-than-expected GDP growth in the first quarter (Q1) bolstered hopes for a sustained recovery, expanding 1.6% on an annualised basis. This likely reflected strong post-pandemic demand, though a potential global slowdown could still weigh on the outlook. In April, Japanese exports saw their weakest increase in over two years, rising 2.6% from a year earlier after 4.3% growth in March, while core inflation, excluding fresh food and energy, was at 3.4% year-on-year in April after 3.1% in March. In China, retail sales jumped 18.4% year-on-year in April, alongside a 5.6% increase in industrial production – though both missed market forecasts, raising concerns for the recovery of the world’s second largest economy.
Figure in focus: 66%
There is a 66% chance that global temperatures will pass the +1.5°C global warming threshold for at least one year between now and 2027, according to new research from the World Meteorological Organisation. There is also a 98% chance the world will experience record-breaking annual temperatures within the next five years, it said, driven by increasing greenhouse gas emissions and a naturally occurring ‘El Niño’ event. The goal of limiting global warming to 1.5°C above pre-industrial times has become a focal point in the global climate agenda and passing it will see the effects of climate change amplified, including more extreme weather events.
Words of wisdom:
Debt ceiling: The maximum outstanding federal debt allowed in the US. First established in 1917, it has been regularly raised as the country seeks to pay its bills while avoiding a potentially damaging debt default. This year the so-called X-date, when the government would exhaust its cash and borrowing capacity, is expected to fall relatively early due to lower-than-expected tax receipts. The government needs the approval of Congress to raise the ceiling – currently at $31.4trn – and in recent decades it has become a source of contentious political debate. Last week, comments from President Joe Biden and the Republican opposition helped encourage optimism about a potential compromise.
What’s coming up
A flash Eurozone consumer confidence indicator is issued Monday – notably April’s tally was the highest since February 2022. Flash Purchasing Managers’ Indices for Japan, Australia, the Eurozone, US and UK are posted Tuesday, with the latter following up with its latest inflation numbers on Wednesday, when the minutes from this month’s US Federal Open Market Committee meeting are also published. On Thursday a second estimate for Q1 US GDP growth is announced – the world’s largest economy increased at an annual rate of 1.1% according to a previous estimate, down from 2.6% in the previous quarter. On Friday, US personal income and spending data covering April are released.
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