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🇫🇮 Finland /Economy & Trade

Eurozone economic indicators turn red

From Helsingin Sanomat · () Finnish

Translated from Finnish and summarized by DistantNews. Read the original for the full story.

At a glance

News Named sources Context piece
  • The European Commission forecasts slower economic growth for the Eurozone in 2023 and 2024 due to energy market disruptions.
  • Inflation is expected to accelerate this year before slowing down next year, prompting the European Central Bank to tighten monetary policy.
  • Purchasing managers' index data indicates a significant economic slowdown in the Eurozone in May, with demand decreasing, particularly in the service sector.

The European Commission's latest economic forecast paints a somber picture for the Eurozone, projecting a slowdown in growth for both 2023 and 2024. This revised outlook, down from earlier predictions, is largely attributed to the ongoing energy market disruptions stemming from the conflict in Ukraine. The economic fallout is multifaceted, impacting both households and businesses.

Households are facing rising energy bills and a general decline in economic confidence, fueled by fears of accelerating inflation and potential job losses. Businesses, meanwhile, are grappling with increased costs, which in turn are driving up consumer prices. The commission anticipates inflation to peak this year before moderating in 2024. This inflationary pressure is leading financial markets to expect a monetary policy tightening by the European Central Bank in June, likely involving a 0.25 percentage point interest rate hike.

The effects of the war in Ukraine on the economy of the Eurozone and Finland appear to be hitting with a delay. As companies' costs increase due to rising energy prices, it accelerates inflation, which means the European Central Bank will eventually have to tighten monetary policy.

· Juho KoistinenJuho Koistinen, forecasting manager at the research institute Labore, explains the delayed impact of the conflict and its effect on monetary policy.

The purchasing managers' index further corroborates this downturn, showing a significant contraction in economic activity in May, the weakest in 31 months. This decline was more pronounced than anticipated, with demand faltering, especially in the service sector, which has been a key driver of growth. As Juho Koistinen, forecasting manager at the research institute Labore, notes, the effects of the conflict are hitting the economy with a delay, forcing the ECB's hand. Minna Kuusisto, chief economist at Danske Bank, highlights the interconnectedness, stating that the Eurozone's economic weakening will inevitably impact Finland's growth amidst global uncertainty.

The Eurozone economy weakened in May, which will inevitably be reflected in Finland's economic growth along with international economic uncertainty.

· Minna KuusistoMinna Kuusisto, chief economist at Danske Bank, comments on the interconnectedness of the Eurozone and Finnish economies.
About this summary

Originally published by Helsingin Sanomat in Finnish. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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