Societe Generale economists report that February activity and labour market data in the Euro area were slightly disappointing but remained within normal ranges, with the unemployment rate rising by one-tenth to 6.2%, which is still considered very low for Europe [1]. In Germany, industrial jobs continue to decline at a rate of -2.7% year-on-year, although the unemployment rate remains stable at 4.0%. German retail sales fell by 0.6% month-on-month, indicating ongoing weakness in consumer activity [1].
French consumer spending on goods surprised to the downside, dropping 1.4% month-on-month. However, when excluding energy, spending was only down 0.2% in January/February compared to Q4, suggesting stagnation rather than a worsening trend [1]. Energy spending in France decreased by 2.4%, and clothing spending fell by 4.0%, with mild temperatures and changes in the timing of sales cited as contributing factors. French industrial production also declined by 0.7% month-on-month in February, though manufacturing production was stable. A downward revision of the January level by 0.4 percentage points resulted in a slightly negative growth carry-over for Q1 [1].
Despite these soft indicators, Societe Generale maintains its forecast for low but positive French real GDP growth of 0.1% quarter-on-quarter in Q1 [1]. The economists note that upcoming industrial output data for Spain and Italy, as well as euro area retail sales figures, are unlikely to impress given the disappointing results from Germany and France [1].
Overall, while the Euro area is experiencing soft growth and weak consumer spending, the labour market remains resilient, and there is no sharp downturn evident in the data. The outlook remains cautious, with expectations for continued stagnation and low positive growth [1].
CONCLUSION
The Euro area is showing resilience despite soft growth and disappointing consumer spending figures, with unemployment rates remaining low and no sharp downturn in sight. Societe Generale forecasts low but positive GDP growth for France in Q1, and upcoming data from Spain and Italy are expected to follow the subdued trend. Market sentiment is cautious, reflecting stagnation rather than deterioration.