Europe's Stellar Growth Is Already Unraveling as Inflation Jumps
Comment of the Day

July 29 2022

Commentary by Eoin Treacy

Europe's Stellar Growth Is Already Unraveling as Inflation Jumps

This article from Bloomberg may be of interest to subscribers. Here is a section:

Europe’s bumper economic growth is already buckling under the weight of record-breaking inflation and the increasing likelihood of a Russian energy cutoff.

Second-quarter output in the 19-member euro zone surged by more than three times the amount analysts expected, with Italy, Spain and France topping estimates by some distance.

But Friday’s data also underlined the challenges: There were contractions for Portugal and the Baltic region, while Germany, the continent’s No. 1 economy, unexpectedly stagnated and may be headed for a recession. Euro-area consumer prices hit a fresh all-time high.

Eoin Treacy's view

Surging energy costs cause recessions because they are a tax on consumption. That’s particularly relevant for Europe, where dependence on Russian gas is a major medium-term issue. The continued uncertainty about Chinese demand for European exports is an additional challenge for the region and suggests the risk of a deep recession is the base case. 

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