Europe’s economic recovery could slow in the midst of the Delta variant


LONDON, United Kingdom – 2021/07/27: Women protect themselves from rain under an umbrella as they pass a sign in a store.

SOPA Pictures LightRocket | Getty Images

LONDON – European consumers are reluctant to spend money this summer, and that could harm the economic recovery after the shock Covid-19, CNBC experts said.

The behavior is a stark contrast to last year, when there was a sense of exploiting the moment after the first closure measures in the region were lifted. Now consumers are afraid that they will live with Covid-19 longer than they expected and adjust their attitudes accordingly.

“Because [the pandemic] has been going on for 18 months, we are used to working from home and [are] more cautious about spending, “Marchel Alexandrovich, a European economist at investment bank Jefferies, told CNBC on Monday.

Consumers are particularly skeptical about attending eventful events, says Paul O’Connor, head of the British multi-fund team at Janus Henderson.

There are areas where we see constant consumer caution.

Paul O’Connor

leader of the multi-purpose British team at Janus Henderson

In an interview with CNBC on Monday, O’Connor said there has been a “steady improvement” in some economic indicators, such as the number of people using public transportation, going shopping, and even visiting the gym. “But there are areas where we see constant consumer caution,” he added.

A survey published in July by Ipsos Morris magazine showed that 40% of British consumers were not yet comfortable on holiday abroad. Over 40% of respondents also said that they are not comfortable going to large public gatherings such as sports or music events.

In addition, “the return to work was very hesitant,” O’Connor said, despite easing Covid’s restrictions in the UK and elsewhere in Europe. This affects the “economy around the office,” like coffee shops, he added, because people opt for a hybrid model of work, spending most of their time at home.

Basic causes

This consumer behavior is influenced by both government legislation and the evolution of the pandemic.

Alexandrovich cited the example of some “hesitant” consumers who do not leave their house before going on vacation to avoid contact with someone who has the virus.

For example, in the UK, if you are in contact with someone who is positive for coronavirus in the coming days, you need to isolate yourself for 10 days — even if you are fully vaccinated (at least for now).

Meanwhile, the highly transmissible variant of Delta Covid has led to an increase in infections in recent weeks.

“Evidence from the UK suggests that the rise in cases is hampering economic activity because people are refraining from reaping the full benefits of reopening,” economists at the Pantheon Macroeconomics said in a note in July.

As a result, this economic consultation slightly lowered UK growth expectations in the third quarter. “We doubt that forecasters will soon have to think about the same in Europe, especially those coming in the third quarter on the basis that GDP (eurozone) will jump by 3%,” they wrote.

Data released on Friday showed that eurozone up 2% in the second quarter of this year, recovering after two consecutive quarters in negative territory.

Although many economists will be optimistic about the eurozone economy in the coming quarters, they describe it as “cautious optimism”.

“The growing” delta “variant of SARS-CoV-2 infection across Europe during June and July increased the risk that lifting the restrictions could be significantly delayed,” analysts in Berenberg said in a note last week, though they noted that the number of new infections appears to be grows in a 19-member bloc.

A waiter wearing a face mask serves customers at a restaurant on Leadenhall in London on July 27, 2021.

TOLGA AKMEN AFP | Getty Images

Bert Colijn, a senior economist at ING, also said in a note last week that “looking ahead [the third quarter], we would note that the Delta variant causes some delays in easing constraints and that supply chain problems continue to burden production production. “However, he still expects GDP growth of 2% in the next quarter.

The momentum could be hit by other factors as well.

“Growth in most major economies is likely to slow in the coming quarters,” Neil Shearing, the group’s chief economist at Capital Economics, said in a note Monday.

“But the main reason is that most economies have already made up for much of the lost production,” he added, arguing that this is likely to be seen in the UK and the eurozone later this year.


Like it? Share with your friends!


What's Your Reaction?

hate hate
confused confused
fail fail
fun fun
geeky geeky
love love
lol lol
omg omg
win win


Your email address will not be published. Required fields are marked *