Coronavirus infection surge hits Eurozone consumer activity

Coronavirus infection surge hits Eurozone consumer activity


High-frequency data shows that the rising rate of new coronavirus infections, new variants of the coronavirus, and the re-implementation of pandemic restrictions are threatening the economic rebound in the euro area, with fewer people going out for shopping, dining and movie theaters.

The economic slowdown has brought further challenges to the European Central Bank. The European Central Bank must also deal with rising inflation. In November, the inflation rate reached a record 4.9%, which is the highest level since the creation of a single currency more than 20 years ago.

Although the Eurozone achieved strong growth in the three months to September, mainly due to a surge in consumer spending, high-frequency indicators that track restaurant reservations, movie ticket sales, and other liquidity indicators indicate that November’s The rebound lost momentum.

“Even before governments announced new Covid restrictions, liquidity in the euro zone began to slow down,” said Bert Colijn, an ING economist.

Austria entered the fourth Covid lockdown on November 22, and Other countries From the Netherlands and Belgium to GermanyIreland, Slovakia, Italy and the Czech Republic have also stepped up efforts to contain the sharp increase in the number of infections.

The threat of the Omicron variant also led to calls for re-blocking after the German National Academy of Sciences Published papers It is recommended that Berlin restrict public and private gatherings, including those vaccinated.

The government's response to the epidemic is strict index line chart 100 = the most stringent shows that countries are tightening restrictions

However, even in countries with stable health conditions such as Spain, consumer spending indicators have slowed down.

According to Google Mobile data, throughout the Eurozone, visits to shops, bars, restaurants, and entertainment centers fell sharply in November. The data showed that the use of public transportation decreased and the time spent at home increased.

The Eurozone Recovery Index, which measures economic activity, released by the Oxford Economics Institute also fell to its lowest level since June, while the OECD’s weekly economic tracking index (based on keyword searches and terms related to spending behavior and labor markets) Many euro zone countries.

An amazing data shows that the number of reservations in German restaurants is lower than in November 2019.

The histogram of the percentage change compared to the same day of the week in 2019 shows a decrease in German restaurant bookings

Encouragingly, economic activity has not fallen as it did in the past periods of high infection rates.

ING’s Colijn said: “This shows that preventive measures or voluntary changes in behavior are still mild, and the fear of the virus is not very strong.”

In addition, although the hotel industry and other industries that are sensitive to the virus may be hit, “this has basically not spread to other areas of the economy,” Barclays Bank economist Silvia Ardagna (Silvia Ardagna) Express.

Even so, according to data from Box Office Mojo, which tracks box office revenue, film revenue in the largest economy in the Eurozone fell by about 20% compared to the previous week on the third weekend of November.

According to data from travel consulting company Sojern, hotel bookings have also fallen sharply, reversing the steady growth trend throughout the fall. After months of recovery, there was a similar decline in the number of flights in November.

Rolling 7-day average line chart, the percentage change compared to the same period in 2019 shows that the number of flights has dropped again

Although the economic impact of the pandemic restriction is smaller than the previous wave of infections, Euler Hermes economist Ana Boata predicts that economic growth in the euro zone will slow to 0.6% from 2.2% in the last quarter of this year. the third quater.

“But this is not negative growth,” she said, but “delayed recovery.”

“The labor market is recovering strongly, and the backlog is huge,” Botta added. After the restrictions are lifted, it is only a matter of time before growth resumes.

Nevertheless, the slowdown in economic growth caused by stricter Covid restrictions and the tension between the potential threat of Omicron and rising inflation caused by supply and labor shortages have created a series of difficult challenges for the European Central Bank.

Capital Investment’s Simon MacAdam wrote in a letter to clients on Wednesday: “If it turns out that Omicron’s malice is sufficient to prompt stricter restrictions, we suspect that the initial end result will be a decline in the inflation rate. “But with worsening… shortages, restrictions on household activities may eventually keep inflation above the target for a longer period of time,” he added.

Federal Reserve Chairman Jay Powell this week expressed his support for a faster withdrawal of the Fed’s huge amount Asset Purchase PlanBut “other central banks may be on the sidelines,” Boata said.

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