ECB Economic Bulletin: Outlook for economic growth and inflation remains highly uncertain

Inflation continues to decline but is still expected to remain too high for too long. 

The near-term economic outlook for the euro area has deteriorated, owing largely to weaker domestic demand. High inflation and tighter financing conditions are dampening spending. 

Euro area output is expected to rise moderately in the third quarter, mainly supported by the services sector.

The labour market remains robust. The unemployment rate stayed at its historical low of 6.5% in May and many new jobs are being created, especially in the services sector. 

The outlook for economic growth and inflation remains highly uncertain.

Upside risks to inflation include potential renewed upward pressures on the costs of energy and food, also related to Russia’s unilateral withdrawal from the Black Sea Grain Initiative. 

Global activity remained resilient in the second quarter, but incoming survey data have started to show signs of a loss of momentum.

The global divergence between the services and manufacturing sectors widened further in June. 

The near-term global trade outlook is clouded by weak merchandise trade, while services trade continues to improve.