Goldman Sachs no longer expects recession in euro zone in 2023
Reuters
Published Jan 10, 2023 07:47AM ET
Updated Jan 10, 2023 08:06AM ET
(Reuters) -Goldman Sachs said on Tuesday it expects the euro zone economy to grow by 0.6% this year, compared with its previous forecast of a contraction, thanks to a fall in natural gas prices and the reopening of China's borders.
"We maintain our view that Euro area growth will be weak over the winter months given the energy crisis but no longer look for a technical recession," Goldman Sachs (NYSE:GS) economists led by Sven Jari Stehn said in a note.
The Wall Street bank had in November forecast a 0.1% contraction for the region. A technical recession is typically defined as two consecutive quarters of contraction in gross domestic product (GDP).
Euro zone inflation is expected to be around 3.25% at the end of 2023 compared with 4.50% forecast earlier, the economists said.
In December, consumer price growth across euro zone slowed to 9.2% from 10.1% a month earlier, Eurostat data showed last week.
Core inflation for the region is also seen slowing to 3.3% by the year-end as goods prices cool, but continued upward pressure is expected on services inflation due to rising labour costs, Goldman said.
Given the "sticky" nature of inflation, Goldman expects the European Central Bank to remain hawkish and deliver 50 basis points hikes in February and March before slowing to 25 bps for a terminal rate of 3.25% in May.
For the UK, Goldman sees a smaller contraction of 0.7% in GDP, compared with an earlier expectation for it to shrink by 1%, helped by lower wholesale gas prices.
As the UK labour market remains overheated, the U.S. bank sees another 100 bps worth of hikes by the Bank of England.
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.