Energy costs soar, vehicle output slumps

Soaring energy costs are yet another headwind to the euro-zone’s economic recovery. That said, while the balance of risks has arguably shifted to the upside, we still think price pressures are likely to ease in the coming year or so, after which inflation will drop back below the ECB’s target. Meanwhile, supply shortages caused a collapse in German auto production in August and reports of car factory shutdowns elsewhere point to a very difficult end to 2021 for euro-zone industry.