Euro-zone recovery starting to falter

Recent falls in euro-zone leading economic indicators suggest that the recovery in the region as a whole may be starting to falter. Admittedly, despite falling for a the third time in four months in April, the EC Economic Sentiment Indicator still points to healthy annual GDP growth of around 3%. But declining consumer sentiment, rising inflation, tightening monetary and fiscal policy and March’s sharp drop in retail sales all add to evidence that domestic demand growth will remain subdued at best this year. Accordingly, as export growth slows to a more sustainable pace this year, we expect growth in the wider economy to slow to a snail’s pace.