Growth Expectations for the Eurozone Remain Largely Unchanged
Business Cycle Tableaus by ZEW and Börsen-ZeitungIncreased Consensus among Experts on Forecasts for Germany and the Eurozone
Business cycle experts foresee only a slight rise in real GDP for the eurozone in 2024, with a more pronounced recovery not expected until 2025. For Germany, a somewhat more positive outlook is projected for 2024, but the forecast stagnates for 2025. Interest rate expectations remain almost unchanged, likely due to the European Central Bank’s (ECB) cautious approach to adjusting key interest rates. For 2025, the experts anticipate a slight decline in inflation rates in both regions. These are the results of the business cycle tableaus by ZEW Mannheim and the German daily newspaper, Börsen-Zeitung.
The quarterly growth figures for the real GDP in the eurozone are projected at 0.1 per cent for the fourth quarter of 2023 and at 0.3 per cent for the first quarter of 2024. In June, experts forecast a 0.7 per cent rise in GDP for the year 2024. The range of individual growth expectations is 0.7 percentage points, indicating a fairly high level of consensus among the experts. For 2025, GDP growth is expected to reach 1.5 per cent, with a range of 1.0 percentage points. The median expectations for both years are identical to the values from May, while the ranges have decreased by 0.1 percentage points each.
High uncertainty regarding future ECB interest rate decisions
Expectations for short-term interest rates (three months) have increased by 0.1 percentage points to a new value of 3.4 points. At 2.8 points, expectations for one-year interest rates have also risen by 0.1 percentage points since May. This rise in expectations may be linked to the ECB’s signals that it will delay further interest rate cuts. The ECB’s cautious stance mirrors that of the US Federal Reserve, which has not yet made any rate changes. The high degree of uncertainty among respondents regarding the ECB’s future interest rate decisions is reflected in the relatively wide ranges of expectations, at 0.9 and 2.3 percentage points, respectively. These values are relatively high given the short forecast horizon.
Slight increase in inflation rates
Inflation rates in the eurozone and Germany rose slightly in May. Specifically, the preliminary inflation rates for May were 2.6 per cent (eurozone) and 2.4 per cent (Germany), each up by 0.2 percentage points from May. The ECB’s hesitation regarding further rate adjustments is likely influenced by these increased inflation rates. For the entire year 2024, experts expect inflation rates of 2.4 per cent for the eurozone (unchanged from May) and 2.4 per cent for Germany (down by 0.1 percentage points from May). Compared to the growth and interest rate forecasts, however, the range of inflation expectations for 2024 still suggests a relatively high level of consensus among the experts, with values of 0.4 (eurozone) and 0.6 (Germany) percentage points. The forecast inflation rates for 2025 are 2.1 per cent (eurozone, down by 0.1 percentage points from May) and 2.1 per cent (Germany, down by 0.1 percentage points from May). The corresponding ranges, at 0.8 (eurozone) and 1.1 (Germany) percentage points, indicate some disagreement on the inflation dynamics in 2025.
More optimistic growth forecasts for Germany in 2024
The quarterly growth figures for Germany are minus 0.5 per cent in the fourth quarter of 2023 and 0.2 per cent in the first quarter of 2024. Growth expectations for 2024 have become slightly more optimistic compared to the previous month, with experts raising their forecast for 2024 by 0.1 percentage points to 0.2 per cent. However, economic growth expectations for 2025 remain unchanged at 1.2 per cent. The ranges of expectations for 2024 and 2025 are 0.9 (down by 0.3 percentage points from May) and 1.1 percentage points (down by 0.1 percentage points from May), respectively. This indicates an increasing consensus among experts regarding the growth outlook for Germany.
Business cycle tableaus by ZEW and Börsen-Zeitung
In cooperation with Börsen-Zeitung, ZEW has been publishing monthly business cycle tableaus for Germany and the Eurozone with economic key figures and forecasts since 2013. Numerous banks and institutes publish reports on the current and prospective economic situation at different intervals. The information relevant for the tableau is extracted from these publications to compute a median, minimum and maximum of the available forecasts for the current and subsequent year.
The monthly tableaus show current forecasts for the GDP, the expenditure breakdown, consumer prices, industrial production, unemployment rate, short- and long-term interest rates, and interest rate differentials (IDRs). The focus of the tableaus lies on national business cycle reports, which are complemented with forecasts from international banks and institutes. The tableau for the eurozone is enhanced by data from European banks and institutions.
