Eurozone | Europe’s consumer boom faces several challenges
We expect above-average growth in the eurozone over the coming quarters given the ample pent-up demand in the aftermath of the crisis. In the short term, economies will still benefit from reopening tailwinds but will be facing several challenges. We see euro area GDP returning to pre-pandemic levels in Q4 2021.
What you will learn:
- Consumer spending will remain the main engine of growth given the strong recovery in employment and incomes as well as the massive stock of savings accumulated by households during the crisis.
- Supply-side issues represent the other main recovery headwind. With global supply-chain problems lingering longer than expected, the industrial sector is unlikely to contribute meaningfully to the recovery in the second half of the year.
- Despite the problems plaguing the industrial sector, we expect a strong cycle for capital spending.
Big shifts are underway in Russia-China trade
Data for Q3 on the volume of China's imports of crude from Russia show a drop against the June level. Rather than an indication that China's demand has peaked, this may be a sign that China is preparing for the Russian oil price cap recently agreed by G7 by shifting some of its purchases to the grey market.Find Out More
Levelling up is unlikely under the Liz Truss government
The government's levelling up ambition has probably been made more, not less, difficult by the new "Plan for Growth". Policies of lower taxes, less regulation, and a smaller state are unlikely to have much beneficial impact on long-term growth at the national level, let alone in those regions with long track records of underperformance.Find Out More