A model of an abandoned apartment building on the outskirts of Shenyang, Liaoning Province, China, on March 31, 2023. JADE GAO/AFP
Worrying signs about the health of the global economy have piled up in recent weeks: a spate of German department store bankruptcies, soaring interest rates in the United States, a real estate crisis in China. “Corporate bankruptcies are on the rise everywhere, and have already exceeded 2019 levels in the UK, Canada and Sweden,” said Bruno de Moura Fernandes, an economist at French credit insurance company COFACE. Global trade is in recession (down 0.7% in the first quarter) and geopolitical risks continue to hurt economic activity. “There are no real disasters,” said Charles-Henri Colombier, an economist at Rexecode. “However, the outlook is bleak and the economy is likely to show sustained weakness over the second half of the year.”
At the beginning of 2023, major concerns related to the energy crisis quickly dissipated and were partially replaced by excessive optimism. Europe can do without Russian gas, China is finally reopening its economy, and tourism is getting back on its feet. “However, manufacturing and business indicators turned out to be quite bad and we are now back to cautious pessimism,” said Hélène Bauchon, economist at BNP Paribas.
This is especially true for the euro area. The economies of France and Spain fared surprisingly well in the second quarter, with GDP growth of 0.5% and 0.4% respectively, while Germany stagnated (0%), although the coming months are set to be even more difficult. is expected. “The tightening of monetary policy is starting to weigh on activity, raising the cost of credit, especially for businesses,” said Riccardo Marcelli Fabiani, an economist at Oxford Economics. In July, the Purchasing Managers' Index (PMI), which reflects managers' business confidence, fell to 47 (a figure above 50 indicates expansion, a figure below indicates contraction). This is the lowest level in the monetary union since November 2020, and there are growing concerns that the economy will worsen. Slow down.
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“Rise in real wages”
Industrial production still increased by 0.5% in June. However, excluding Ireland's figure (+13.1%), which is artificially inflated by the presence of multinationals, output fell by 0.9%. “This is becoming more of a concern as we are starting to see a slowdown in the services sector, which has been relatively strong so far,” said Anna Titaleva, an economist at UBS.
Capital Economics estimates that tourism boosted euro zone growth by 0.3 percentage points in the first half of 2023. However, the European economy will no longer be able to rely on this contribution in the second half of the year as tourism returns to pre-COVID-19 levels.
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