Eurozone | A massive spending spree is coming, but not until 2022
We have revised up our forecasts for eurozone private consumption, and now envisage spending increasing 3.1% in 2021 and by a staggering 7% in 2022. Our forecast, which is well to the upside of consensus (3.7% and 4.5%), is based on our view that most of the restraint on spending has been forced by lockdowns rather than being a voluntary response to uncertainty.
What you will learn from this report:
- We expect consumption to return to pre-pandemic levels as early as mid-2022, boosted by pent-up demand in the later stages of the recovery.
- We think consumers will spend about one-fifth of their huge excess savings through to 2025, equal to around 3% of the annual consumer spend.
- Having amassed excess savings worth €500bn in 2020, households still face curbs on spending options due to prolonged Covid containment measures. So by early-2022, excess savings could reach €840bn – 13% of 2019 consumer spending.
Finland’s growth forecast cut amid weak confidence and soaring inflation
We have lowered our 2022 GDP growth forecast for Finland to 1.5% from 1.7% last month, as weakening confidence further dampens the outlook. We expect inflation to peak higher with a greater passthrough to core prices, squeezing real incomes and denting consumption. Russia has accounted for almost 10% of Finland's goods trade, among the highest in Europe.Find Out More
Why we see eurozone inflation slowing sharply next year
We have revised our 2022 eurozone inflation forecasts sharply higher, to 6.0%, since the start of the Ukraine war, as energy and food prices began to soar and new supply bottlenecks emerged. That said, we still see inflation decelerating sharply to 1.3% in 2023, putting us below consensus. While we recognise significant risks to our views, inflation should slow to below 2% in H2 2023.Find Out More