Creditreform Economic Briefs 

In the following you will find the key take aways from the actual Economic Briefs, published by Creditreform:

1. We expect the euro area GDP growth to decelerate to 0.5% this year, corresponding to a downward revision compared with our previous Economic Briefs. A likely weak final quarter of 2023 and additional  uncertainty about the international economic developments in light of the tensions in the Middle East curb growth expectations for 2024. We project a moderate acceleration to 1.2%, supported by an expected pick-up in private consumption on the back of lower inflation rates, as well as by impulses from nonconstruction investment, aided by EU funds related to the Recovery and Resilience Facility. 
2. The inflation rate has decreased markedly in the euro area, but remains some way off the 2% target. Core inflation is lagging behind and is proving to be rather sticky. We expect the ECB’s monetary policy rates to remain at their current levels until the second half of 2024. By the end of 2024, we forecast the main refinancing rate to be at 4.0%, compared with 4.5% currently. 
3. While public debt ratios have generally declined following the global pandemic, the debt-to-GDP ratio has not yet returned to pre-pandemic levels in most euro area countries. Significantly higher capital market  borrowing costs, shifting energy supplies and the costly green transformation, as well as geopolitical tensions, pose a challenging environment in which to pursue fiscal consolidation.
4. Germany’s economy continues to underperform other major euro area economies, burdened by the ongoing structural changes in its energy supply. After a likely negative growth rate in 2023 (-0.1%), we expect a feeble recovery in 2024. With private consumption as the main driver next year, we think GDP growth will only reach 0.8%, a downward revision of our previous forecast for 2024. The construction sector remains significantly hampered, while investment in machinery and equipment should contribute positively to GDP growth this year and next. Meanwhile, the number of corporate defaults is on the rise. 
5. Although it has avoided a technical recession, the UK economy continues to be weak. UK inflation, which remains the highest in the G7, has come down more markedly of late. We now believe that the Bank of England will not lift the bank rate above the current level of 5.25%, whilst we maintain our view that a rate cut will not come before the second half of 2024. The Bank of England’s tightening cycle has left its mark on the housing market, with transaction numbers decreasing and the house price index dropping on an annual basis for the first time since 2012.
6. The US economy remains on track for a soft landing, while the pace of job creation is slowing further. The Fed pauses its hiking cycle, but maintains a tightening bias. Our updated baseline scenario now assumes that the Fed funds rate has peaked at 5.25-5.50% and that a first rate cut will not take place until the second half of 2024.

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