Economics: Gauging eurozone recession risk

The outlook for the eurozone economy has clearly deteriorated

Recession risks have undoubtedly risen since the turn of the year. The real labour income squeeze that began last year has intensified. And the conflict in Ukraine threatens the recovery via both the trade and financial channel.

Our dashboard provides a way to assess recession risks as new data arrives

Worryingly, roughly half of the indicators that provide a short-term warning are flashing red. Survey-based measures of activity have weakened, consumer and business confidence has dropped, and systemic stress has risen.

The ECB are undoubtedly in a tricky position 

For some on the Governing Council, the time for tightening has arrived. Stopping asset purchases is a start. The scope to go further this year (by raising the deposit rate itself) will be determined by how recession risks develop in the next few months.