Light from the rising sun catches the eastern face of the Matterhorn. Sean Gallup/Getty Images.

Recent European economic data has turned lower, and economic surprises have turned negative for the first time since mid-2016.

Macquarie Bank says this suggests the best of the European economic recovery may now be behind us.

Eurozone inflation data for January will be released on Wednesday. That will be followed this weekend by Italy’s general election.

It looks like the European economic recovery of the past couple of years may have already reached its crescendo, at least based off recent indicators.

As seen in this charts from Macquarie, many sentiment indicators have turned lower since the end of 2017.

Source: Macquarie Bank

And economic data surprises — having consistently beaten expectations since the middle of 2016 — have also turned negative, symptomatic that as the economy has improved, expectations have been raised.

Source: Macquarie Bank

“It’s not confirmed that growth is slowing, but evidence is mounting,” Macquarie says.

So should investors be worried about what lies ahead?

In short, no, says Macquarie.

“Even if this is the ‘momentum peak’ we have been expecting, we don’t think it is anything to worry about economically,” it says.

“Despite February’s weakness the surveys still point to impressive economic growth of around 0.8% [in the first quarter of the year]”.

However, while the economy looks set to shoot the lights out in the near-term, Macquarie says now is not the time to be complacent, suggesting that the recovery over the past couple of years has allowed “investors to ignore or put the best gloss on most other factors”.

“That period appears to have come to an end and we could be in for a period of greater market volatility,” it says.

“For example, it makes Eurozone inflation harder to interpret — are higher readings good or bad?

“It also brings political concerns back up the agenda, mostly forgotten as the economic expansion gathered steam.”

Eurozone inflation data for January will be released on Wednesday. That will be followed this weekend by Italy’s general election.

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