Trade & Sector NewsQuarterly Report on the Euro Area (QREA) No. 4 (2023)

This edition studies some aspects of the shocks that have recently affected the euro area and some of the benefits of the European response.

In particular, it analyses the causes of food inflation, pointing to the role of production costs and costs related to distribution. Second, it analyses the impact of the COVID-19 shock on the accumulation of human skills in the EA and its negative consequences for future GDP developments.

Key issues:

• Economic data have pointed to continued weakness
• GDP in the euro area stagnated before the summer of 2023 and narrowly avoided a technical recession after the summer
• GDP in the euro area is projected to grow by only 0.8% in 2024 on the back of subdued internal and external demand, and of the more restrictive policy mix
• On inflation, however, the outlook is more positive. The stalling of activity in 2023 has added to the initial sharp fall in energy prices, bringing a broad-based and rapid moderation of price pressures both in headline inflation and in core inflation.
• The HICP inflation is expected to halve, from 5.4% in 2023 to 2.7% in 2024, substantially below the 3.4% projected in the Autumn Forecast.
• January data confirm this decrease with HICP inflation at 2.8%.
• Past issues of the Quarterly Report on the Euro Area (QREA) have looked at many different dimensions of the impact of the COVID-19 shock in the euro area economy
• On labour market outcomes, the analysis shows that the 2020 graduating cohort seem fortunately resilient in the current situation of tight labour markets, but the long-term economic impact of learning deficits is likely to be non-negligible.

Links:

Quarterly Report on the Euro Area (QREA), No. 4 (2023)