The European zone's economic recovery remains tentative as planned but remains fragile based on indicators suggested on Monday, adding that there are signs that a recession is averted.
Energy prices and borrowing costs are balanced with business sentiment data, investment spending and consumer confidence. Inflation is still high and interest rate hikes are seen peaking.
Some economic readings have been better than before but Monday's retail trade data, key sentiment indicators, and construction numbers cast doubt on market confidence.
Eurozone retail sales, a good proxy for consumer demand, rebounded much less than expected in January, challenging other data, including the PMI survey, which showed a robust recovery.
Retail sales rose 0.3% in the month, below the 1% rise forecast by economists, and fell 2.3% year-on-year.
That suggests "a weak start to the year amid high prices," said economist Bert Colijn. "Although the outlook for the first quarter has been quite positive so far, these sales data do not provide much evidence that a recovery has begun."
Data last week showed that inflation in Germany, France and Spain – three of the bloc's top four economies – unexpectedly rose in February.
Another bad sentiment was that the Sentix Index, a leading indicator of investor sentiment, unexpectedly fell in March for the first time since October, following a decline in expectations.
On the other hand, the Euro Zone Construction PMI offers positive news from the sector. The reading rose to a nine-month high of 47.6 in February from 46.1 in January, but it was below the 50 mark that separates expansion from contraction.
Economic growth and business confidence are also held back by rising borrowing costs and increased caution from commercial banks, which lend more selectively.
Philip Lane predicts that the ECB is likely to raise rates by 50 basis points this month.
