European Economy Stalls Below Trend Amid Energy Concerns
The latest Economic Confidence Indicator (ECI) for the European Union (EZ) remains below trend growth, despite showing some improvement in August. The EZ Manufacturing PMI rose to 52.8, exceeding expectations of 51.8, and services also saw a marginal increase to 51.7 from 51.5 forecasted.
The positive news is largely attributed to Germany's defence spending and AI-related output. However, experts note that this growth is still below trend, and domestic demand has softened due to lower real wages. The European Central Bank (ECB) continues to monitor energy prices closely, which remain a key concern for the EZ economy.
The ECB's baseline scenario for oil prices has held up well so far, but natural gas prices are more in line with the adverse scenario. TTF gas prices have risen due to low inventory levels, although summer 2027 prices are expected to be around EUR42, a 30-35% decrease from current levels.