Our long-held view that the European economy will fare relatively well during the current global economic downturn has come under threat from the surge in inflation in the region. Not only has the squeeze on households’ real income reduced the chances of a meaningful pick-up in the growth of consumer spending, but inflation has forced central banks to tighten policy further even as activity has started to slow more sharply. The relative lack of major economic imbalances should still mean that the region grows reasonably solidly compared to the US economy over the next year or two. But further rises in inflation and corrective action from central banks could lead to a deeper slowdown in the European economy.
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