Omicron won’t cause euro-zone to contract in Q1

Omicron will reduce economic activity in the coming weeks due to tighter restrictions, consumer caution and absenteeism. Our best guess is that economic activity in the euro-zone will decline in January but for now we assume it will rebound in February. We are pencilling in GDP growth of 0.5% q/q in Q1.
Andrew Kenningham Chief Europe Economist
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European Economics Update

How big a deal is the Ukraine crisis for the euro-zone?

A Russian military invasion of Ukraine would adversely affect the euro-zone economy by further disrupting the market for energy, pushing up inflation and reducing households’ real incomes. However, any economic fallout would probably be fairly small and short-lived and other factors, not least the course of the pandemic, will continue to have much more influence on the economy. In view of the wider interest, we are also sending this European Economics Update to clients of our Energy Service.

25 January 2022

European Economics Update

Rising house prices strengthen ECB hawks’ case

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25 January 2022

European Data Response

German Ifo Survey (January)

The increase in the Ifo Business Climate Index (BCI) in January provides more evidence that, after contracting in late 2021, conditions have stabilised at the start of the year. With disruption from the Omicron wave likely to ease in the coming weeks, we think German GDP will increase in Q1. Euro-zone Drop-In: Why the ECB will be laying the groundwork for rate hikes in 2023. Join Andrew Kenningham and the Europe team for a discussion about their Q1 euro-zone Economic Outlook report on Tuesday, 1 Feb at 09:00 EST/14:00 GMT. Registration here.

25 January 2022

More from Andrew Kenningham

European Data Response

German Industrial Production (November)

The unexpected decline in German industrial production in November increases the chance that GDP fell in the last quarter of 2021. And with the Omicron variant likely to hit Germany hard in the coming weeks, the outlook for Q1 is also looking poor.

7 January 2022

European Data Response

Germany Flash Inflation (December)

Germany’s HICP inflation rate fell to 5.7% in December and is now past its peak, but the national CPI measure, which is arguably a better indicator at the moment, rose slightly. Looking ahead, we expect Germany’s inflation rate to fall further this year, but to remain uncomfortably far above 2%.

6 January 2022

European Economics Update

Key calls for the euro-zone in 2022

We think euro-zone GDP growth will be lower than most anticipate this year, at around 3.5%, while inflation will come down towards 2% by year-end allowing the ECB to leave interest rates unchanged and continue net asset purchases. The big risk is that inflation is higher for longer than we forecast.

5 January 2022
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