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Euro-zone Final HICP (July)

Final inflation data for July underline that price pressures remain strong and broad-based. With wholesale natural gas and electricity prices having surged again in the weeks since July, retail gas and electricity prices are set to rise steeply in the coming months, keeping the headline rate high.

18 August 2022

Euro-zone GDP & Employment (Q2)

The chunky rise in euro-zone GDP in Q2 reflected the re-opening of the services sector and was accompanied by a further increase in employment. But a combination of high inflation, rising interest rates and the energy crisis will push the economy into recession before the end of this year. Europe Drop-In (18th Aug.): Winter is coming to the European economy – but how harsh will it get? Join this special briefing on the economic impact of Russia’s gas supply threat. Register now.  

17 August 2022

German ZEW Survey (August)

The ZEW survey fell again in August and is at a level consistent with the economy contracting. We now think a recession is unavoidable in the second half of this year as the impact of high energy prices on both households and industry takes effect. Europe Drop-In (18th Aug.): Winter is coming to the European economy – but how harsh will it get? Join this special briefing on the economic impact of Russia’s gas supply threat. Register now.  

16 August 2022
More Publications

Dublin office rebound to run out of steam

Rents in the Dublin prime office market rose rapidly in H1 2022, supported by a continued recovery in occupier demand. However, a cooling jobs market and strong supply pipeline mean that a slowdown is likely in the second half of the year.

Energy crisis hotting up

The biggest problem in Europe’s energy markets is the reduction in Russia’s gas exports. But extreme weather conditions are compounding the problem by making life difficult for nuclear, hydro and coal-fired power plants. Next week, we expect to learn that employment increased slightly in the second quarter. Drop-In: Europe under siege – The economic impact of Russia’s gas threat Thursday, 18th August 10:00 ET/15:00 BST. Register now.

Why we expect a euro-zone recession

We think the euro-zone will soon fall into recession as high inflation, tighter monetary policy and weak global growth take their toll. While the economy should recover next year, the rebound will be held back by a lack of policy support. What’s more, we think the biggest risks to our forecasts are to the downside, notably from Russia turning off the gas taps completely or the ECB failing to avert a sovereign debt crisis.

Rhine troubles add to pressure on German industry

The fall in the Rhine’s water level is a small problem for German industry compared to the gas crisis, or indeed the recent shortage of semiconductors. But if it persists until December it could subtract 0.2ppts from GDP in Q3 and Q4 and add a touch to inflation.

How big is the threat of an end to Russian gas exports?

An end to Russian gas exports to Europe would prompt us to forecast a deeper recession in the euro-zone this winter than we currently anticipate. The hit would come partly through higher inflation, which would further squeeze real incomes, and partly through gas rationing, which would particularly affect industry. As an illustrative scenario we think the combined effect would reduce annual GDP by around 2% in the euro-zone next year relative to our current forecast.

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