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European economic recovery could slow in Delta variants

London, UK-2021/07/27: Women protect themselves from the rain under an umbrella while walking by the store sign.

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London — European consumers have proved more reluctant to spend money this summer, which could undermine the post-shock economic recovery COVID-19, The expert told CNBC.

This behavior contrasts with last year, when there was a feeling of being captured shortly after the first Covid blockade in the area was lifted. Consumers are now afraid to live with Covid-19 longer than expected and are adjusting their attitudes accordingly.

“because [the pandemic] It’s been about 18 months, so I’m used to working from home [are] Marchelle Alexandrovich, a European economist at investment bank Jeffreys, told CNBC on Monday.

Consumers are particularly skeptical of attending crowded events, according to Paul O’Connor, head of Janus Henderson’s UK-based multi-asset team.

There are several areas where consumer attention continues.

Paul O’Connor

Head of the Janus Henderson Multi-Asset UK Team

O’Connor spoke with CNBC on Monday that he saw “steady improvements” in some economic indicators, including the number of people using public transport, shopping and going to the gym. “But there are some areas where consumer attention continues,” he added.

NS Research According to a July announcement by Ipsos Moris, 40% of UK consumers were still worried about taking vacations abroad. In addition, more than 40% of respondents said they were reluctant to go to large public gatherings such as sports and music events.

“I was very hesitant to get back to work,” O’Connor said, despite the deregulation of Covid in the UK and elsewhere in Europe. He added that this is affecting the “economy around the office” such as coffee shops. People choose a hybrid working model and spend most of their time at home.

root cause

This consumer behavior is influenced by both government law and pandemic developments.

Alexandrovich gave an example of a “hesitating” consumer who wouldn’t leave home before going on vacation to avoid contact with someone infected with the virus.

In the UK, for example, if you come into contact with someone who tests positive for the coronavirus the next day, you will need to self-isolate for 10 days, even if you are completely vaccinated (at least for now).

On the other hand, highly contagious variants of Delta Covid have led to a surge in infection in recent weeks.

Pantheon Macroeconomics economists wrote in a July memo: “British evidence suggests that the surge in incidents is hampering economic activity as people refrain from maximizing resumption. “.

As a result, the economic consultant slightly lowered expectations for UK growth in the third quarter. “Predictors will soon have to think the same in Europe, especially those who will enter the third quarter at the baseline of a 3% leap in (eurozone) GDP,” they wrote.

The data released on Friday is Eurozone grew 2% In the second quarter of this year, it recovered in the negative territory for the second consecutive quarter.

Many economists are bullish on the eurozone economy in the coming quarters, but describe it as “cautious optimism.”

“From June to July, the surge in” delta “mutations of SARS-CoV-2 infections increased the risk of a significant delay in continued deregulation,” a Belenberg analyst said in a memo last week. Stated. The number of new infections seems to have culminated in a block of 19 members.

On July 27, 2021, a waiter wearing a face mask will serve customers at a restaurant at Leadenhall Market in London.

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Bert Colijn, senior economist at ING, also said in a note last week: [the third quarter]You will find that supply chain problems continue to weigh on manufacturing production, as Delta variants are causing some delays in the relaxation of restrictions. But he still expects GDP to grow by 2% in the next quarter.

Momentum can also be struck by other factors.

“Growth in most major economies is likely to slow in the coming quarters,” Neil Shearing, group chief economist at Capital Economics, said in a note on Monday.

“But the main reason is that most economies are regaining much of the lost production,” he added, arguing that this is likely to be seen in the UK and the euro area later this year. did.

European economic recovery could slow in Delta variants

Source link European economic recovery could slow in Delta variants

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