The 73 largest companies in the euro area are watching “a broad stagnation or mild contraction of economic activity in the fourth quarter, but with notable differences between sectors”according to a survey carried out by the European Central Bank (ECB).
Many companies said in the survey, which the ECB conducted between January 4 and 12 and published this Friday, that orders and sales have contracted due to the fall in household consumption and a year-on-year inventory adjustment. “unusually large”.
But other factors “supported growth in many sectors, including the easing of supply restrictions and lingering recovery effects”according to the ECB.
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Most industry contacts said their business activity fell by “the drop in demand for many durable consumer goods, the weakening of construction and the adjustment of inventories”.
Specifically, demand for consumer electronics and many household items fell due to rising prices and the fact that many people bought these items in advance during the pandemic.
Residential property construction is increasingly affected by falling demand due to rising input costs and interest rates.
“The drawdown in inventories at the end of the year was larger than normal, in part because high prices had made working capital more expensive, but also because earlier supply problems had caused companies to carry more inventory than usual. usual”, says the ECB.
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On the contrary, adds the monetary institution, “consumer demand for many non-durable goods and services was more resilient”.
The largest companies in the euro area expect economic activity to remain weak and say the outlook for 2023 is very uncertain, but are hopeful of a rebound during the year given the recent fall in energy prices and the high gas storage, which eased concerns about gas shortages.
Other factors supporting this optimism are strong employment, higher wages and support from governments, along with lower inflation, which will stem the decline in real disposable income.
In addition, the end of the zero covid policy in China will also predictably boost global demand from spring.
Source: EFE
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Source: Gestion
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