Hard GDP data have confirmed that most economies saw sharp rebounds in activity in Q3 after the lockdowns of Q2. But monthly data suggest that the pace of improvement slowed during the quarter and the latest renewed tightening of restrictions in advanced and emerging Europe bodes ill for Q4. Indeed, we have already seen visits to retail sites weaken throughout Europe, especially in France. (See Chart 1.) The news of an effective vaccine is very encouraging, but this is unlikely to boost activity until next year. We still suspect that unemployment has further to rise in some economies as government support schemes are scaled back, which suggests that recent disinflationary tendencies will be sustained for some time.
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