European Commission upwardly revises their growth forecasts for the EU
Ireland: Ireland is expected to be top of EU’s growth list, with expectations that the county’s economy will grow 5.5 % and 5% over 2023 and 2024, respectively. This follows meteoric growth for the country which has seen their economy soar 12% in 2022 and 13.6% in 2021 – much of which was driven by a major boost in pharma and tech exports over the pandemic. Ireland’s low-tax environment has continued to attract foreign investment and taxes on intellectual property assets are now a key source of revenue for Ireland. This dynamic has helped Dublin to raise around €22.6bn in corporation tax last year – a gargantuan 182% rise from half-a-decade ago – thus helping to increase public spending and investment. Nevertheless, recently Ireland has seen a significant drop in computer, electronics and optical products singling some concern for a cornerstone of the county’s economy. Only yesterday, Industrial production in Ireland fell 26.3% between February and March.
Sweden: Conversely, Sweden is expected to undergo a recession this year with economists predicting the Scandinavian country to be the worst performer amongst the EU. Chiefly, Sweden’s growth has been hit by a property market slump, deeply problematic for a country whose home-ownership rate is a considerable 70%. The dip has hindered consumer confidence, and hit household finances, particularly given the high level of Swedes on variable mortgage rates. In recement months, the Swedish construction sector has also been hampered by raising interest rates which has dampened investment, and a weakening krona has also exacerbated Stockholm’s economic challenges. Furthermore, the Swedish government has also done relatively little (compared to other EU states) to help business and consumers against rising energy costs, thus damaging growth as pockets dry up.
UK Employment Data
As the BoE continues to grapple with double-digit inflation, this morning’s employment data has revealed that public sector pay has risen by 5.6% on an annualised basis – the greatest rise in 20 years. This comes as private sector pay grew by 7% including bonuses and 6.7% excluding bonuses. As such, policy makers will want to ensure that the economy avoids any undue wage-price spiral effect as they try to bring inflation back down to their 2% target. This rise in wages of course comes following the BoE’s Huw Pill stating that British households should “accept that they’re worse off”, though when accounting for inflation average pay including bonuses fell by 3% in the year to January to March, and 2% excluding bonuses.
This morning’s data from the ONS also indicates that unemployment has risen higher-than-expected to 3.9%. This marks the highest level of unemployment since the early 2022 as the number of unemployed people rose by 60,000. While unemployment rose, the economic activity rate also increased – rising 0.4 percentage points to 79%. This was primarily driven by a rise in the number of part-time employees and self-employed workers, many of whom are returning to the workforce following the ‘Great Resignation’.
Industrial Production Slumps Across Eurozone
As Brussel’s tried to encourage markets with expectations of higher growth, industrial production levels slumped across the Eurozone, marking their largest decline since the pandemic. Industrial production fell 4.1% between February and March, far worse than expectations of a 2.4% decline. Here, the decline in the production of capital goods was a major factor behind the overall decline as well as the production of intermediary goods.
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