EU foresees economy improving, but inflation still painful  

• The European Union’s executive branch has raised its economic growth forecast for the year, saying Europe will narrowly avoid a recession and has already passed its inflation peak as natural gas prices fall from astronomical highs. But the European Commission warned Monday that the high prices plaguing consumers will keep holding back the economy for months to come.
• Growth for 2023 should reach 0.8% for the 20 EU countries that use the euro currency, the commission said in its winter economic outlook. That is an increase from 0.3% expected in the last outlook from November. Getting credit for the improvement was the high level of natural gas storage that has alleviated fears of energy rationing over the winter. European utilities and governments raced to line up new supplies after Russia cut off most natural gas deliveries to Europe amid the war in Ukraine.
• The economy is expected to avoid a contraction in the current January-to-March quarter, the commission said. Coming after growth of 0.1% in the final three months of last year, that indicates there won’t be a technical recession as was once feared.
• Headwinds to the economy are strong, the commission said in its report. Energy costs and consumer prices are still high even after three straight months of decline in annual inflation from the 10.6% peak in October to 8.5% in January. On top of that, the European Central Bank is sharply raising interest rates to contain inflation, a step that dampens growth by raising the cost of borrowing for consumers and businesses.

(Source: AP News)