Sat. Oct 16th, 2021


Europeans are leaving their homes to go shopping, dining, traveling and visiting cinemas just like before the pandemic, in a sign that consumer confidence in the eurozone is returning.

Data on economic activity in September suggest that European consumers are excited about high vaccination rates against Covid-19, despite a string of worrying economic news, including higher energy bills, chain disruptions and concerns about the impact of an economic slowdown in China.

“Right now, the data remains in line with a proper recovery,” said Davide Oneglia, an economist at TS Lombard, a research and macroeconomic forecasting consultant.

Line graph of percentage change compared to the average of January 3 and February 6, a rolling average of 7 days.  shows that Europeans spend less time at home

Some of the recovery is because schools have reopened and workers are returning to offices. This is reflected in the use of airports and domestic public transport in the eurozone, both of which have reached their highest level since the start of the pandemic in early 2020, according to mobility data from Google and Apple respectively.

Line chart of change in routing requests since 13 January 2020 showing increased use of public transport

But an increase in shopping trips, dining out and cinema “indicates that consumers now have more confidence”, says Marion Amiot, senior economist at the rating agency S&P. Cinema revenue has already returned to pre-pandemic levels, according to data from Box Office Mojo.

Bar graph from 15-19 September, $ m showing that the revenue of the box office has recovered

Policymakers are increasingly monitoring non-standard economic measures, such as mobility indicators, for a timely but less comprehensive snapshot of economic activity than official data.

The increase in consumer confidence comes amid a decline in Covid-19 infections and a doubling in the past three months of the number of fully vaccinated. By mid-September, nearly two-thirds of the eurozone population had twice received.

“Our recovery was strong in the first half of September, rising by a cumulative 2.3 points to a new pandemic,” said Nicola Nobile, an economist at Oxford Economics Consultant. “The tracker has gained solid momentum.”

Line graph of '000, a rolling average of 7 days showing Covid-19 infections declining in the eurozone

The strength of consumer confidence “supports our view that growth in household consumption accelerated this quarter,” added Melanie Debono, senior economist at Pantheon Macroeconomics.

As consumption in the second quarter represents 1.9 percentage points of the 2.2 percent growth of the eurozone in the second quarter, Chiara Zangarelli of Nomura predicted that the economic recovery of the bloc would continue and an expansion of 2.3 % forecast in the third quarter. The OECD also recently updated its economic forecast for the eurozone for this year.

Line graph of% change compared to the same day of the week in 2019, with a rolling average of 7 days showing that flight numbers have stabilized at the levels seen in the summer

But growth in the eurozone could slow in the coming months. China’s economic slowdown could hit exporters, international travel is still about 30 percent lower than pre-pandemic levels and supply chains have hit manufacturers hard, as evidenced by an unexpectedly sharp drop in recent business sentiment surveys. German kilometers over trucks, which are considered industrial activities, will also remain low in 2021.

The recovery of the eurozone remains behind the US and China, whose economies have already reached pre-pandemic levels.

Line graph of a rolling average of 7 days, 2015 = 100 which subtracted the kilometers of the German truck deteriorated

Nevertheless, a weekly OECD tracker of economic activity, using real-time high-frequency indicators, rose above 2019 in most eurozone areas in early September.

Line graph of% change in the same week two years earlier, with a continuous average of 4 weeks, showing that the weekly OECD tracker of economic activity improves

The labor market also remains strong, with vacancies still increasing, according to data from job site Indeed.

This could give the European Central Bank confidence that it could scale down its emergency asset purchase pandemic program next year, says Marchel Alexandrovich, an economist at investment bank Jefferies. He predicts that the eurozone economy will return to its pre-pandemic level in the next two quarters.

Line graph of percentage change in positions since 1 February 2020 showing vacancies in the eurozone

But as ECB President Christine Lagarde said this month, the eurozone is “not out of the woods” and uncertainty is mounting.

Kallum Pickering, senior economist at investment bank Berenberg, said: ‘Concerns over the Delta wave of Covid-19 infections, worsening supply shortages, rising energy prices, turmoil in parts of China’s oversized real estate markets and rising inflation are contributing to a unpleasant mixture. ”



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