European economy faces ‘long and bumpy’ recovery
Improvement in sentiment fuels optimism but activity data still depressed
Europe’s economic recovery from the coronavirus pandemic is well under way, according to sentiment indicators, high-frequency measures and hard data — but activity remains far below normal levels, suggesting that the recovery from recession will be a struggle.
The continent’s workers and consumers began to return to work, shopping and dining out from last month onwards, generating an initial post-lockdown rebound.
But high-frequency data indicators such as footfall and consumer spending suggest that the economic improvement is patchy and limited by social-distancing measures.
The figures are more up to date than official economic indicators, although they are also experimental and the extent to which they reflect the subsequent trends documented in official data is variable.
Real-time data “have spurred hopes of a quick economic rebound . . . but this expectation is overly optimistic”, said Madhavi Bokil, vice-president of credit rating agency Moody’s. “The recovery is more likely to be a long and bumpy slog rather than a quick rebound.”
On Monday, the European Commission’s latest economic sentiment indicators for the eurozone are expected to show sharp improvements in June, mirroring gains in business sentiment indicators which were published last week.
The strong rebound recorded in survey-based data “provides further evidence that the recovery is a little quicker than we had anticipated”, said Jessica Hinds, European economist at Capital Economics. However, “the level of activity remains very depressed compared to the start of the year”.
A large chunk of the continent’s economy remains restricted and international travel and trade are still in a deep downturn.
“We see a sharp initial rebound in consumption to be followed by a much slower recovery, as households will prefer to keep precautionary savings, due to uncertainty and income risks,” said Nicola Nobile, economist at Oxford Economics.
Peter Vanden Houte, chief economist at ING, warned that waning government aid and rising job cuts would begin to weigh on the rebound in the coming months, while social-distancing measures only allow a partial return of service sector activity.
On Monday, the European Commission’s latest economic sentiment indicators for the eurozone are expected to show sharp improvements in June, mirroring gains in business sentiment indicators which were published last week.
The strong rebound recorded in survey-based data “provides further evidence that the recovery is a little quicker than we had anticipated”, said Jessica Hinds, European economist at Capital Economics. However, “the level of activity remains very depressed compared to the start of the year”.
A large chunk of the continent’s economy remains restricted and international travel and trade are still in a deep downturn.
“We see a sharp initial rebound in consumption to be followed by a much slower recovery, as households will prefer to keep precautionary savings, due to uncertainty and income risks,” said Nicola Nobile, economist at Oxford Economics.
Peter Vanden Houte, chief economist at ING, warned that waning government aid and rising job cuts would begin to weigh on the rebound in the coming months, while social-distancing measures only allow a partial return of service sector activity.