Forward-looking data, including Vanguard’s risks to this view are skewed to the downside; leading economic indicator, point to continued We do not rule out the prospect of a double-dip weakness ahead (Figure I-19). In our base case, recession in the second half of 2023 given that we expect that the euro-area economy will have European gas supply will be starting from a much entered recession from the fourth quarter of lower base than in 2022 and financial conditions 2022, with growth turning positive only in the will be tighter. Upside risks include milder-than- second half of 2023. We anticipate that Germany expected weather or an earlier-than-expected and Italy will underperform, given their relatively resolution to the war. As with the U.S., many large energy-intensive industrial sectors. The of the risks come down to luck. FIGURE I-19 Vanguard leading economic indicator points to further deterioration in economic growth s % % e Below trend, negative momentum r g o n Below trend, positive momentum t a a h h  c c t Above trend, negative momentum i  e d w n o ag Above trend, positive momentum g i r t n  n i P ge GD earoverear ange d c a D r e  e p a G f l e r r a e o a e g - y o - a r r t – u e n  E v e o c - r r e a P e  – y             Notes: Monthly data from January 2000 to October 2022. The Vanguard leading economic indicator (VLEI) dashboard considers a range of leading indicators, sorted based on current levels relative to trend and underlying momentum. Indicators include consumer confidence, industrial production, retail sales, trade- weighted euro, factory orders, and stock market indexes. Source: Vanguard, as of October 31, 2022. 24