Business surveys still paint a gloomy picture

The euro-zone business and consumer surveys have recently begun to weaken at a less rapid pace, suggesting that the downturn may be beginning to bottoming out. Nonetheless, it is still too early to conclude that the worst of the recession is over. Both the composite PMI and EC Economic Sentiment Indicator are at record lows and the former appears consistent with a further fall in GDP of around 1% in Q1. What’s more, a sharper fall is possible - the index is not always an accurate predictor of actual GDP growth and was far too optimistic in Q4. Accordingly, we still expect the euro-zone economy to contract by 3.0% this year.