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Q4 outlook darkens as tighter restrictions loom

Germany’s worsening Covid situation means much of the country could be subject to much tighter restrictions soon, potentially knocking around 0.25%-pts off euro-zone Q4 GDP. Even if other countries impose less draconian rules, consumer caution might mean the euro-zone as a whole stagnates in Q4.
Jessica Hinds Europe Economist
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European Data Response

German Ifo Survey (May)

The Ifo survey for May suggests that activity in Germany may be holding up a little better than we had feared. But the headline Business Climate Index is still consistent with GDP contracting in year-on-year terms and the expectations component shows that businesses think the situation will get worse. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.

23 May 2022

European Data Response

Euro-zone Consumer Confidence (May)

The small increase in euro-zone consumer confidence in May left it only slightly higher than its low point at the start of the pandemic. With confidence extremely low and real incomes squeezed by high inflation, we expect a drop in household spending to cause the euro-zone economy to contract in Q2.

20 May 2022

European Economics Weekly

High inflation, record trade deficit

Data released over the past week revealed that the euro-zone recorded its first monthly current account deficit since 2012 and provided further evidence that underlying price pressures are building. We expect the latter to prompt the ECB to raise rates by 25bp, if not 50bp, in July. Next week, the PMIs and Ifo for May will provide more evidence that the euro-zone and German economies are at risk of recession. ECB Drop-In (24th May 10:00 ET/15:00 BST): Could the ECB deliver a hawkish surprise? Join economists from our Europe and Markets teams for a discussion about what to expect from the Bank’s tightening cycle, including the chances for a bumper hike in July or even an early move at next month’s meeting. Register now.  

20 May 2022

More from Jessica Hinds

European Data Response

Euro-zone Flash PMIs (Nov.)

The unexpected rise in the euro-zone Composite PMI in November suggests that the region’s recovery has not lost further momentum. But with supply shortages still acute, Covid restrictions being tightened and price pressures intensifying, renewed falls in the index seem likely.

23 November 2021

European Economics Weekly

Austria lockdown casts shadow over rest of euro-zone

The “full lockdown” in Austria announced earlier today is a response to the rapid deterioration in the Covid situation there and we estimate that it could knock around 1.5% off the country’s GDP in Q4. While on its own this would not make a big difference to euro-zone GDP, there is a clear risk that other larger economies, notably Germany, are forced to follow suit. Our euro-zone Q4 GDP growth forecast may well prove too optimistic and stagnation, or even contraction, are plausible.

19 November 2021

European Economics Update

Wage indexation won’t drive second round effects

The current bout of high inflation will put much less direct upward pressure on negotiated wages in the euro-zone than in previous such episodes. This is because far fewer agreements now contain inflation-linked clauses and those which do are typically based on a measure that excludes energy.

16 November 2021
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