The euro area periphery data continues its improvement and in line with that sovereign yields have move downwards even though spreads have widened a bit recently. Survey data has remained at relatively high levels and across countries consumer confidence has recently increased considerably and points to positive growth in private consumption. In most of the periphery countries, hard data also shows signs of stabilisation and generally confirms the picture from survey data even though some of the latest improvement still needs to be seen.
We look for a continued gradual improvement. The return of confidence is expected to result in a slow recovery in domestic private sector demand this year. In our view, there is an upside risk to growth in the periphery as we expect pent-up demand in investments and durable consumer goods to boost growth. The short-term outlook seems less challenging than it has been for a long time and the widespread improvement in economic sentiment appears more robust.
Country details
Italian service PMI is close to 50 and manufacturing PMI remains around the highest level since 2011. Industrial production seems to have bottomed but there is room for improvement in consumption and unemployment despite some signs of stabilisation.
The Spanish recovery continues to look stronger than it has done for a long time. GDP grew 0.3% q/q in Q4 - the highest growth rate in almost six years. The first survey indictors for 2014 confirm that the outlook looks more resilient.
In Greece , manufacturing PMI continues its upward trend. In January, it was above 50 and at the highest level since August 2008. Consumer confidence is on a slightly positive trend but has not improved in the same way as in other periphery countries.
The recovery in Portugal seems to be continuing. Economic sentiment is at a pre-crisis level and in particular industrial production continues its upward trend. The unemployment rate is at the lowest level in one and a half years.
Irish PMIs remain high and continue to point to strong growth. Consumer confidence has stayed at pre-crisis levels and the upward trend in retail sales gets stronger. The unemployment rate also continues to decline and is now around the euro area average.
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