Increased Covid infections, new coronavirus variants, and re-enforcement of pandemic restrictions threaten the recovery of the eurozone economy, with people going shopping, eating at restaurants, and visiting cinemas. Is less.
The slowdown poses further challenges for the European Central Bank. The European Central Bank also needs to deal with the rise in inflation, which reached a record 4.9% in November. This is the best since a single currency was created over 20 years ago.
The euro area recorded strong growth in the three months to September, but with a high frequency of tracking restaurant reservations, cinema ticket sales and other mobility indicators, largely due to the surge in consumer spending. Indicators suggest that the recovery momentum in November has been lost.
Bert Colijn, ING’s economist, said:
Austria entered its fourth Covid blockade on 22 November. Other countries From the Netherlands and Belgium Germany, Ireland, Slovakia, Italy and the Czech Republic have also stepped up efforts to curb the outbreak.
The threat of Omicron variants has also led to a demand for a new blockade in Germany after the National Academy of Sciences. Published a dissertation Advise Berlin to introduce restrictions on public and private meetings, including vaccination.
But even in countries like Spain, where health is stable, consumer spending is slowing.
Visits to shops, bars, restaurants and entertainment centers have dropped significantly across the euro area in November, according to Google’s mobility data, which shows less public transport usage and more time spent at home. bottom.
The Eurozone recovery index, an indicator of activity released by Oxford Economics, has also fallen to its lowest level since June, and the OECD’s weekly economic tracker is based on keyword searches for terms related to spending behavior and the labor market, much more. Eurozone countries.
One of the surprising data shows that German restaurant bookings are below the November 2019 level.
Encouragingly, economic activity is not as depressed as it was during the high-infection period of the past.
“This suggests that voluntary changes in precautions or behavior are still mild and the fear of the virus is not yet so strong,” said Colijn of ING.
In addition, virus-sensitive sectors such as hospitality may have been hit, but “this generally hasn’t spilled over into other economies,” said Barclays economist Silvia Ardanha.
Still, according to Box Office Mojo, which tracks box office revenues, movie revenues across the eurozone’s largest economy fell by about 20% on the third weekend of November compared to the previous week.
Hotel bookings have also dropped significantly, as data from travel consultant Sojern show, reversing steady improvements throughout the fall. Flight numbers saw a similar decline in November after a few months of recovery.
Although the economic impact of pandemic regulation was less than in previous waves of infection, Euler Hermes economist Anabota predicts that eurozone economic growth will drop from 2.2% to 0.6% in the final quarter of this year. I am. Third quarter.
“But that’s not negative growth,” she said, rather “delayed recovery.”
“The labor market is recovering very strongly and there is a lot of work backlog,” Bota added. “A matter of time” until the restrictions are lifted and growth recovers.
Still, tensions between the slowdown in economic growth due to Covid’s tightening of regulations and the potential threat of Omicron, and the rise in inflation due to supply and labor shortages, combine difficult challenges for the ECB. I am producing.
“If Omicron turns out to be malignant enough to drive tighter regulation, the end result is likely to be lower inflation initially,” Simon Macadam of Capital Economics said Wednesday. .. “But by getting worse … shortages, restrictions on household activity can lead to keeping inflation above target for longer,” he added.
Jay Powell, chairman of the Federal Reserve Board this week, has expressed support for the faster withdrawal of the Federal Reserve giant. Asset purchase program.. But “other central banks could be in standby mode,” Beauta said.
Eurozone consumer activity jumping into Covid infections
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