Inflation won’t surge in the euro-zone like in the US

Inflation won’t surge in the euro-zone like in the US

We think that euro-zone headline inflation will rise further than most expect in the second half of this year. But rather than reaching the levels of around 5% seen in the US, it is likely to top out at about 3% before falling back sharply in 2022.
Jack Allen-Reynolds Senior Europe Economist
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European Economics Weekly

ECB’s line on inflation contrasts with the Fed’s

In contrast to those at the US Fed, ECB policymakers are not ready to retire their argument that the current bout of high inflation is temporary. This reflects the significant difference in inflationary pressures between the two economies. Next week, we will get the detailed breakdown of November’s German inflation data, which will shed more light on the stronger-than-expected outturn. Meanwhile, with less than two weeks to go until December’s ECB meeting, the Governing Council appears to have reached a consensus on some aspects of its asset purchase programmes. But comments from Christine Lagarde today suggest that it will avoid making any long-term commitments.

3 December 2021

European Data Response

Euro-zone Retail Sales (Oct) & Final PMIs (Nov.)

Euro-zone retail sales have levelled off since June, but rising Covid cases and the return of restrictions are likely to weigh on sales and other components of consumption in the coming months.

3 December 2021

European Data Response

EZ Unemployment (Oct.)

While labour market conditions continued to improve in October, the recent deterioration of the Covid situation and increased uncertainty due to the Omicron variant are likely to mean the recovery takes a breather over the next couple of months, just as it did when restrictions were in place at the start of 2021.

2 December 2021

More from Jack Allen-Reynolds

European Data Response

Euro-zone Flash PMIs (July)

July’s euro-zone PMIs confirm that the economy is still rebounding rapidly and that price pressures are continuing to build. While the Delta variant poses a risk to our above-consensus GDP forecasts, it seems most likely that governments will avoid strict new lockdowns. And we think that the sharp increases in input and output prices will be temporary.

23 July 2021

Nordic & Swiss Economics Weekly

SNB not following ECB; Sweden bucks inflation trend

The SNB confirmed this week that it wouldn’t be following the ECB in raising its inflation target, but that doesn’t change the big picture that it looks set to leave interest rates on hold for a very long time. Meanwhile inflation in Sweden bucked the recent trend in the US and UK by falling below target in June, and we think the Riksbank will also leave rates on hold for longer than investors anticipate. If the Riksbank ends up tightening sooner than expected, it would be due to concerns about rising house prices rather than consumer prices.

16 July 2021

European Data Response

Euro-zone Industrial Production (May)

The euro-zone’s industrial sector took a step backwards in May as the global semiconductor shortage hit auto production. Supply disruptions look set to drag on for a while yet, constraining the sector’s recovery, but the business surveys point to strong underlying demand.

14 July 2021
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