Economic Overview 

The European Central Bank (ECB) announced it will cut rates for the first time in five years in June 2024, lowering the deposit rate by 25 bps to 3.75%. This comes after a period of record high levels at 4.00%, the highest since the launch of the euro.  

The preceding period of continuous rate hikes that started in 2022 was used as a tool to curb rapid inflation across Europe, where levels reached a record high of 10.60% in October 2022. As price pressures began to ease, headline eurozone inflation reached 2.50% in June 2024, down from 2.60% in May 2024, and is edging closer to the 2.00% target. Progress made in tackling inflation has allowed the ECB to start on the path of gradual rate decreases. 

But despite progress over recent quarters, domestic price pressures remain along with wage growth elevation. Economists now predict inflation will stay above target into next year, and, as a result, projections have been revised up for 2024 and 2025, with headline inflation averaging 2.50% in 2024 and 2.20% in 2025. Financial security should begin to improve somewhat later in the year as the difficulties associated with persistently high rates begin to dissipate. 

The unemployment rate across Europe remains historically low at 6.03% in 2024, slightly up from level 6.01% in 2023 and is forecast to reach 5.86% in 2025. The employment expectations indicator in the EU and eurozone also remains above the long-term average. A tight labour market bodes well for consumer finances but will continue to affect wage growth pressures. 

Turbulent market conditions resulted in flat GDP growth in 2023 at 0.55%, with little movement forecast for 2024 at 0.57%. This is expected to pick up in 2025, with growth forecast to reach 1.80%. The announced cut in interest rates should boost economic activity by making it cheaper for consumers and businesses to borrow, re-stimulating the economy. 

_{Read the articles within Spotlight: European Grocery Market 2024 below.}