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.
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

European Data Response

Euro-zone GDP & Employment (Q3)

The decent increase in euro-zone GDP in Q3 means that the recovery is now almost complete in most of the region. We had already expected growth to slow markedly in Q4 as the boost from reopening fades and supply chain disruption takes its toll, but the recent rise in Covid cases is an additional downside risk.

16 November 2021

European Economics Update

Spanish inflation surge another headwind to recovery

The jump in headline inflation in Spain in October was almost entirely down to the electricity component. We do not expect this bout of higher inflation to last, but in the meantime, consumers are facing a squeeze on real incomes that risks leaving Spain’s economy even further behind its peers.

12 November 2021

European Economics Update

Spain’s recovery held back by tourism and consumers

Spain is a long way behind its euro-zone neighbours in recovering from the pandemic. That is partly because its important tourism sector has been hamstrung by travel restrictions but it also reflects domestic weakness. Some of the shortfall will be recouped in the coming quarters, but Spain will continue to lag.

4 November 2021
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