The surge in spending as coronavirus restrictions have been lifted will bring the euro-zone economy close to its pre-pandemic level in the coming months. After expanding by 2% q/q in Q2, we expect a similar increase in Q3. Both business and consumer sentiment are strong and order books are full. High frequency mobility data also suggest that things are getting back to normal. The main exception is the tourist sector; although there has been a big increase in flight numbers in the past few weeks, it is still running well below normal levels. Meanwhile, inflation rose above 2% in July and there is mounting price pressure in supply chains, while producer price inflation reached double-digit levels and points to HICP inflation rising further in the coming months. That said, we are confident that inflation will drop back again next year to below the ECB’s 2% target.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services