Labour market slack to fall further, mitigating shortages

Data published this week provide more evidence that the supply of labour has held up fairly well in the euro-zone and that those who have left the labour market have probably not done so permanently. This should help to keep a lid on wage growth at a time when labour shortages are becoming more widespread.
Jessica Hinds 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 Jessica Hinds

Nordic & Swiss Data Response

Sweden GDP Indicator (Q3) & ETI (Oct.)

The stronger-than-expected growth in Swedish GDP in Q3 shows that the recovery continued apace over the summer, lifting activity even further above its pre-pandemic level. But while business confidence increased in October, the detail suggests that supply chain shortages are hitting Swedish production.

28 October 2021

European Economics Weekly

Energy costs soar, vehicle output slumps

Soaring energy costs are yet another headwind to the euro-zone’s economic recovery. That said, while the balance of risks has arguably shifted to the upside, we still think price pressures are likely to ease in the coming year or so, after which inflation will drop back below the ECB’s target. Meanwhile, supply shortages caused a collapse in German auto production in August and reports of car factory shutdowns elsewhere point to a very difficult end to 2021 for euro-zone industry.

8 October 2021

European Data Response

Euro-zone Final PMIs (Sep.)

The PMIs are consistent with the euro-zone’s economic recovery losing some momentum as GDP approaches its pre-pandemic size and as supply shortages take their toll, especially in manufacturing. The surveys also show that price pressures are spreading to the services sector, even in parts of the periphery.

5 October 2021
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