Fresh lockdown will cause new contraction

We now expect euro-zone GDP to contract by 3% q/q in Q4 and to be unchanged in Q1 2021, based on the latest lockdown measures staying in place for three months. A return to the stricter measures of the first wave, which is a quite plausible, would result in GDP falling by around 6% in Q4.
Andrew Kenningham Chief Europe Economist
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European Economics Weekly

ECB rate hikes a distant prospect, Merkel era at an end

Even as other central banks hinted this week at a shift towards tighter monetary policy, we doubt that the ECB will follow suit. Meanwhile, the business surveys suggested that while supply-chain disruptions and rising input prices took the shine off the region’s recovery in September, GDP probably still grew very strongly in Q3. Next week brings the results of Germany’s federal election on Sunday and the start of probably lengthy coalition negotiations and the usual month-end raft of data.

24 September 2021

European Data Response

German Ifo Survey (September)

The third successive decline in the Ifo Business Climate Index in September provides further evidence that Germany’s recovery is losing steam, as supply chain difficulties persist and the surge in gas prices piles additional pressure on prices and production. That said, we still expect strong GDP growth in Q3, given the low base at the start of Q2.

24 September 2021

European Economics Update

Five questions and answers about Germany’s election

The federal election in Germany on Sunday will result in a new chancellor for the first time since 2005 and opinion polls suggest that the result will be extremely close with potentially months of coalition talks ahead. In this Update, we answer five key questions about the election.

23 September 2021

More from Andrew Kenningham

European Economics Update

ECB’s new target marks death of Bundesbank tradition

If confirmed, the ECB’s decision to adopt a 2% inflation target and allow room to overshoot it if needed would mark a historic shift towards the mainstream for the ECB. It would have no immediate implications for monetary policy, but in the longer run may imply policy would be looser for longer.

8 July 2021

European Chart Book

Activity taking off as hospitality reopens

The economy has continued to rebound strongly as governments have lifted almost all restrictions on retail and restaurants and eased rules on foreign travel. Restaurant bookings are back above pre-pandemic levels and the number of flights is rising steeply (no pun intended!). This rebound is likely to put a bit more pressure on inflation, which looks set to resume its upward course in the second half of the year after pausing in June. The latest statements from key policymakers suggest that the ECB is in no hurry to scale back its asset purchases, but we think the Governing Council will begin to taper its bond-buying in the coming months.

7 July 2021

European Data Response

German Industrial Production (May)

The small decline in German industrial production in May, which left it well below its pre-pandemic level, was due to another big fall in vehicle production. The problems in that, admittedly important, sector are likely to be resolved only gradually, but otherwise the German economy is recovering strongly.

7 July 2021
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