General statisticsQuarterly Report on the Euro Area (QREA), Vol. 23, No. 1 (2024)

This edition features three analytical chapters revolving around inflation:

  1. Impact of the recent terms-of-trade generated inflation on public debt sustainability
  2. Channels through which climate change - and endeavours to mitigate or adapt to it - may affect inflation
  3. It analyses how a sectoral wage shock interacts with the structure of the economy and propagates into inflation.

The issue closes with a special euro area chronicle presenting a chronology of the euro from its origin to its 25th anniversary.


Key facts:
  • The strong rebound of economic activity in the first quarter of 2024 pulled the euro area out of the recession registered in the last two quarters of 2023.
  • Though short-lived and mild, the recession followed a prolonged period of weak performance.
  • The high cost of living has held back real disposable income growth while high debt repayment costs have continued to push up the saving rate of households – delaying the expected rebound of consumption.
  • Investment also disappointed, held back by tight financial conditions and elevated uncertainty.
  • Global merchandise trade was particularly weak throughout last year, though a stronger contraction of imports than exports, resulted in a positive contribution of net external demand, tough the latter was largely offset by the drag of an unusually large inventory cycle.
  • At the same time, weak economic activity supported the disinflationary process which progressed at somewhat faster pace than anticipated.
  • Inflation came down from a peak of 10.6% in October 2022 to 2.4% in April 2024.
  • The labour market, in turn, has proved extremely resilient, with headcount employment continuing to expand throughout Q4-2023.
  • As headwinds from tight monetary policy abate, global trade rebounds and real wages expand further, the conditions are in place for a continued economic expansion of economic activity in 2024 and a further acceleration in 2025.

In the central scenario, inflation is set to continue its descent towards the 2% medium-term ECB target. Certain factors may however slow down the disinflation process. Though labour market tightness and nominal wage growth moderate, growth in real wage is set to continue. Wage increases are expected to be absorbed by productivity gains and a further reduction in profit margins, but this is not to be taken for granted. Furthermore, in certain large HICP categories, particularly services, inflation is showing considerable stickiness



Quarterly Report on the Euro Area (QREA), Vol. 23, No. 1 (2024)

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