The contrasting economic fortunes of the core of Europe and those at the edge of, or outside, the euro area persist. The consensus view has been that euroland economic growth will begin to accelerate this year and that there will be a slowdown (or even recession in the case of the UK) in the periphery.
This view looks like being confounded. Unemployment in euroland's biggest economies has stopped falling. Consumer confidence will slip unless those out of work start to get fewer again. If not, real wage gains will get saved, not spent. Then the widely expected recovery in core Europe during the second half of this year will founder. In the UK, by contrast, there are signs of growing consumer confidence, boosted by low mortgage rates and a buoyant labour market in services.
Europe's industrial sector is struggling. Order books are thin and capacity utilization is declining. So Europe's consumers must become the mainstay of any recovery this year. With real wage gains of 2% to 3% in the bag for 1999 in Germany and France, the ingredients for a consumer-led recovery are certainly there. But in the absence of household confidence, those wage gains are just as likely to be saved as spent.