Euro area: Expansion remains modest yet shows continued strength – Societe Generale

Eurozone Economic Update: February Trends and Outlook

According to Societe Generale economists, February's economic and employment figures for the Eurozone showed minor setbacks but remained within typical boundaries. The region's unemployment rate stood at 6.2%. In Germany, industrial employment continued to decrease and retail sales dropped, while France saw weaker consumer spending, especially in energy and apparel. Despite these developments, analysts still anticipate modest but positive growth in French real GDP, projecting a 0.1% increase quarter-on-quarter for the first quarter.

Mixed Signals Without Significant Decline

Recent data on activity and the labour market for February fell short of expectations but stayed within normal limits. Eurozone unemployment edged up by 0.1 percentage points, reaching 6.2%, which remains low for the region. Germany continues to lose industrial jobs at a notable rate (down 2.7% year-over-year), although its unemployment rate holds steady at 4.0%. Retail sales in Germany slipped by 0.6% compared to the previous month.

In France, consumer spending on goods unexpectedly dropped by 1.4% month-on-month. When energy purchases are excluded, spending only decreased by 0.2% in January and February compared to the fourth quarter, suggesting ongoing stagnation rather than a worsening trend.

Warmer weather and changes in sales timing contributed to reduced energy spending (down 2.4%) and lower clothing expenditures (down 4.0%). Excluding energy, the decline in spending remains limited to 0.2% over the first two months of the year versus the previous quarter, reinforcing the view of stagnation rather than deterioration.

February's mild temperatures also resulted in a 0.7% month-on-month drop in French industrial output. Manufacturing remained steady, but a downward revision of January's figures by 0.4 percentage points means the growth momentum for the first quarter is slightly negative. These results align with forecasts for minimal real GDP growth in France during Q1 (0.1% quarter-on-quarter).

This week, industrial production data from Spain (Thursday) and Italy (Friday) will be released. Additionally, Eurozone retail sales for February, due Wednesday, are expected to show little improvement given the disappointing figures from Germany and France.

(This article was generated with assistance from an AI tool and reviewed by an editor.)