Effect of shortages on activity and inflation will persist

There is growing evidence that global goods shortages are weighing on euro-zone activity. We expect this to contribute to a marked slowdown in growth in Q4, and the outlook for early 2022 is no better. What’s more, it looks likely that the shortage-driven increase in goods inflation has further to run.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

Euro-zone GDP barely grew in Q4, inflation risks rise

Data released this week suggest that our assumption that euro-zone GDP rose by 0.2% in Q4 could be too optimistic, but we still think that the economy will grow in Q1. Meanwhile, rapid house price inflation adds to the case for the ECB to, in Jay Powell’s words, start thinking about thinking about raising interest rates.

14 January 2022

European Data Response

German GDP (2021)

Provisional data showing that Germany’s GDP increased by 2.7% last year and news that it shrank in Q4 underlines that its recovery has lagged many of its peers, including the US, France and the UK. We think that German GDP will expand by less than the consensus expects this year too.

14 January 2022

European Economics Update

ECB likely to raise rates to zero in 2023

With pandemic-related inflationary pressures proving a bit more intense and persistent than we had anticipated, and policymakers sounding more willing to tighten policy, we think the ECB is most likely to end net asset purchases in December 2022 and raise its deposit rate to zero by end-2023. Drop-In: Neil Shearing will host an online panel of our senior economists to answer your questions and update on macro and markets this Thursday, 13th January (11:00 ET/16:00 GMT). Register for the latest on everything from Omicron to the Fed to our key calls for 2022. Registration here.

12 January 2022

More from Jack Allen-Reynolds

European Data Response

Euro-zone Retail Sales (Sep.)

Retail sales have levelled off since June as consumer spending on other services has increased. The latest survey evidence suggests that low inventory levels might also be limiting sales and are set to push up prices further in the coming months.

5 November 2021

Nordic & Swiss Economics Weekly

Supply problems remain; Norges Bank to press on

Sweden’s Q3 GDP data, published this week, were not as strong as they first appeared, and we expect supply problems to continue to weigh on activity there. The latest data for Switzerland suggest that it is holding up better. Next week, we expect Swiss CPI data to show that inflation there remains well below that elsewhere in Europe. And while the Norges Bank will not spring any surprises at its meeting on Thursday, we think investors are underestimating the pace of rate hikes next year.

29 October 2021

European Data Response

Euro-zone Flash HICP (Oct.)

Euro-zone inflation looks set to rise further before year-end as higher input costs continue to feed through. We agree with the ECB that the forces pushing inflation up should fade next year, and our central forecast is for headline and core inflation to end 2022 below 2%. But given the uncertainty around how long supply problems will persist, the risks are clearly skewed towards a longer-lasting overshoot of 2%.

29 October 2021
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