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.
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.Click HERE to subscribe to Fuller Treacy Money Back to top