What’s up, Europe? - A Recovery Delayed, but not Derailed
What’s up, Europe? - A Recovery Delayed, but not Derailed

  • The European economy is waking up from its hibernation
  • ECB steps up stimulus signalling this is not the time for tightening of financial conditions
  • Political shifts have both upside and downside risks, but could even result in deeper integration and a stronger role for fiscal policy in the longer term

The euro area economy plunged 6.8 % in 2020, far exceeding the 3.5 % contraction in the US economy. However, large differences were visible within euro area, with Spain’s GDP contracting by 11% and Lithuania’s by only 0.8%. Now Europe’s slow vaccine roll-out and stricter containment measures mean that its economic recovery will lag behind the recovery in the US. Indeed, available data from the euro area point to a modest contraction in the first quarter of 2021. Going forward, the development in Europe continues to be uneven across countries and sectors; a phrase that has become popular during the pandemic.

Renewed containment measures across Europe weighted business activity, especially in the services sectors, in January and February. However, the recent euro area flash PMI’s significantly outperformed expectations in March. The composite PMI index inched up, from 48.8 in February to 52.5 in March, which is the highest reading since last July. The higher expansion than expected was driven mainly by a record surge in manufacturing output which offset the contraction in services.

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For more information please contact

Heidi Schauman, heidi.schauman@swedbank.fi  +358 50 328 1229

Sonja Liukkonen, sonja.liukkonen@swedbank.fi +358 400982159

Vytenis Šimkus, vytenis.simkus@swedbank.lt, +370 687 17870

Nerijus Mačiulis, nerijus.maciulis@swedbank.lt +370 5258 22 37

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