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Recession steps away, but it is still too early to claim victory

Apr 5, 2023

Redacción Mapfre

The risk of recession seems to be stepping away in the Eurozone, after the manufacturing PMI came in at 53.7 in March, up from 52 in the previous month. This indicator measures the level of private sector activity and is used to predict economic growth in a particular region: above 50, it reflects expansion in the sector, and below, a contraction.

"Data is not bad. The perception is that the economy is not going to evolve as badly as previously thought, so the prospect of a recession seems to be receding. However, it is still too early to claim victory," said Alberto Matellán, chief economist at MAPFRE Inversión.

Macroeconomic data points out to "weak but positive" growth, avoiding recession, although the chief economist of MAPFRE Inversión stresses that inflation forecasts are still there and they "are dangerous".

On the other hand, he sees no difference in the growth forecasts for the United States and Europe, which, although they started from different levels, seem to have been equalized in recent weeks.

What worries Matellán the most is the divergence between the message of the central banks and the markets: while the former are announcing more rate hikes to fight inflation, the latter are forecasting only one more hike and cuts from the summer onwards.

On the eve of the start of the corporate results season, Matellán does not believe that there will be "big scares" as he considers that "the worst has already been discounted in the price".

Oil production cut

The Organization of the Petroleum Exporting Countries (OPEC) decided last weekend to reduce oil production by at least one million barrels. That caught the market by surprise and pushed its price above 80 dollars.

Ismael García Puente, fund manager and selector of MAPFRE Gestión Patrimonial, explained that this decision seeks to adjust supply to demand, as a greater impact was expected from the reopening in China after the pandemic, among other factors.

Likewise, García Puente recalls that the financial stability of some of the member countries depends on the price of the raw material, so if they see "damage to their public accounts", they act accordingly.

Matellán points out that oil is always marked by growth prospects and notes that this move could increase its price in a "more sustained" way, placing it around 85 dollars.

Rise in gold

Gold is another of the commodities that has also risen strongly in recent days, something which, according to Matellán, is due to its quality as a safe haven in the face of uncertainty and inflation.

This is in addition to the depreciation of the dollar after the collapse of Silicon Valley Bank (SVB) and the Credit Suisse crisis, which have caused a sharp rise in the value of gold.

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