Hopes Grow That Eurozone Will Dodge Recession

Muhammad Irfan Published January 24, 2023 | 06:44 PM

Europe's economy grew in January for the first time since June, a closely watched survey showed Tuesday, raising hopes that the eurozone will avoid a recession this winter

Brussels, (UrduPoint / Pakistan Point News - 24th Jan, 2023 ):Europe's economy grew in January for the first time since June, a closely watched survey showed Tuesday, raising hopes that the eurozone will avoid a recession this winter.

Europe has benefited from lower inflation, improved supply chains and the recent reopening of China's Covid-scarred economy, leading to increased optimism for 2023.

The outlook for the single currency area is significantly brighter than it was a few months ago, when panic set in over the impact of Russia's war in Ukraine on Europe's economy.

The S&P Global Flash Eurozone purchasing managers' index (PMI) rose to 50.2 in January from 49.3 in December. A figure higher than 50 indicates growth.

"This was the third successive increase and, as such, provides more evidence that the region has so far avoided the sharp downturn that we and many others had predicted," Andrew Kenningham, chief Europe economist at Capital Economics, said in a note.

Almost all experts warned last year that the eurozone would enter a recession -- two consecutive quarters in which the economy shrinks -- in the final three months of 2022 and the first quarter of 2023.

Those fears are receding, but Europe still faces challenges ahead.

Demand for goods and services continued to weaken, industrial orders fell in January -- although less sharply than in December -- and the impact of more interest rates hikes could still be felt.

European Central Bank chief Christine Lagarde on Monday showed no signs of moving away from more rate hikes, insisting they must continue rising at a "steady pace" in order to avoid inflation becoming entrenched.

Inflation in the single currency area remains high at 9.2 percent, but has fallen for two months in a row, boosted by the slowdown in the rate of energy price rises.