Euro Area Poised for Recovery
The euro area is poised to begin its economic recovery. In the first quarter, economic output is expected to have fallen by a further 0.4 percent compared with the previous quarter, when it shrank by 0.7 percent. This is the consensus of three research institutes: ifo in Munich, KOF in Zurich, and Istat in Rome. The second quarter is expected to see growth of 1.5 percent over the first quarter, followed by 2.2 percent in the third.
“We expect a recovery soon if the vaccination campaigns proceed swiftly”, says KOF researcher Heiner Mikosch.
The researchers also expect inflation to rise to 1.1 percent in the first quarter – up 0.3 per cent compared with the same quarter in 2020 – and to 1.8 per cent in the second quarter. In the third quarter, inflation is expected to increase by as much as 2.1 per cent compared with the same period 12 months earlier.
After a sluggish start to the year, investment and consumer spending by private households should also start to pick up as of the second quarter, while industrial manufacturing is already growing across the board.
However, the forecast is very uncertain and depends on how the coronavirus pandemic develops. Vaccines are coming along, but the vaccination campaign is proceeding more slowly than hoped in the euro area. Infection rates are on the rise again, and sectors are closing as a result. At the same time, however, manufacturing operations are continuing and the Chinese and US economies are strong.
Eurozone Economic Outlook
This quarterly publication is prepared jointly by the German external page ifo Institute, the KOF Swiss Economic Institute, and the Italian external page Istat Institute. The forecast results are based on consensus estimates building on common macroeconomic forecast methods by the three institutes. Download Details (PDF, 723 KB) can be found here.
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