Labour market recovery won’t spark wage spiral

We estimate that the spare capacity in the euro-zone’s labour market has increased by around four million people, or 2.5% of the labour force, since the start of the pandemic. This is likely to disappear over the next couple of years as the economy recovers. Labour shortages are appearing as the economy re-opens, but these are likely to prove temporary and so will not put general upward pressure on wages or inflation.
Jessica Hinds Europe Economist
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European Economics Weekly

Reopening effects to persist in Q3

The surge in German inflation, to 3.8% on the national CPI measure in July, may have got some pulses racing in Frankfurt, but core euro-zone inflation remains very low and we continue to think that the ECB will struggle with excessively low inflation over the medium term. Next week we expect to learn that euro-zone retail sales rose again in June and the Composite PMIs for Spain and Italy increased in July.

30 July 2021

European Data Response

Euro-zone GDP and Employment (Q2)

After increasing more than expected in Q2, thanks to strong growth in the southern economies, euro-zone GDP should expand rapidly again in Q3 as core economies close in on their pandemic levels. China slowdown webinar: Join us on Thursday, 5th August for a special webinar assessing the impact of China’s economic slowdown on the global recovery. Neil Shearing will lead a discussion with economists from across our economics and markets services to assess whether investors should brace for fresh volatility with China poised for a structural deceleration. Register here for sessions at 0900 BST/1600 HKT or 1100 ET/1600 BST.  

30 July 2021

European Data Response

Euro-zone Flash HICP (July)

Euro-zone inflation resumed its upward trend in July and we expect it to rise further in the remainder of the year. But this is largely due to temporary factors, which should fade in 2022.

30 July 2021

More from Jessica Hinds

European Data Response

Euro-zone Final PMIs (June)

The PMIs point to the euro-zone economy recovering strongly in June and provide evidence that price pressures are now spilling over into the services sector, even in the periphery. Nevertheless, we still think that higher inflation will prove temporary as shortages should ease in the second half of the year.

5 July 2021

European Data Response

EZ Unemployment (May) & Final Mfg PMIs (Jun.)

The big fall in euro-zone unemployment in May highlights that the re-opening of many services sector firms in that month has boosted hiring activity. And with a strong recovery now underway, it now looks unlikely that unemployment will rise in the coming quarters.

1 July 2021

European Economics Update

EU vaccine passport won’t spark surge in tourism

The EU’s digital Covid certificate, which is being launched tomorrow, will have very little impact on European tourism this year. Non-essential travel is already possible, but most adults are not fully vaccinated and the Delta variant is making people and governments more cautious about the health implications of foreign holidays. We expect the tourism sector to remain very subdued this summer.

30 June 2021
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