S&P Global Ratings last week raised its European economic growth forecast for 2021 from 4.4% to 5.1%, citing the rapid improvement in economic output, labor market and corporate investment levels.
The Organization for Economic Cooperation and Development has a similar view. It said last week that it expects the Eurozone economy to grow by 5.3% this year, an increase of 1 percentage point from its May forecast.
The big picture: Standard & Poor’s now expects Europe to return to its pre-crisis GDP level by the end of this year, one quarter ahead of its previous forecast.
The European Union’s vaccine campaign promoted economic growth. The campaign started slowly but is now one of the most successful campaigns in the world. Official data show that more than 72% of EU adults over 18 years of age are fully vaccinated, while 66% of Americans over 18 years of age have been vaccinated.
The emergency response to the coronavirus also played an important role. The European Central Bank responded to the crisis with a major bond purchase program, and governments have also launched programs to ensure workers are paid.
More future: According to data from Standard & Poor’s, European consumers have accumulated more than 300 billion euros (350 billion US dollars) in excess cash reserves during the pandemic, and they have begun to consume, which will help promote a sustained rebound in the service industry.
At the same time, EU countries began to receive huge grants and cheap loans from the EU’s 800 billion euros (940 billion U.S. dollars) recovery fund. According to Standard & Poor’s data, by 2026, the stimulus plan may increase the Eurozone GDP by 3.9%.
Status check: The United States and China are facing major resistance.
The introduction of the vaccine has been affected in the United States, where the proportion of people who have received at least one dose of the vaccine is the lowest among the G7. The OECD lowered its forecast for the United States in 2021 by 0.9 percentage points to 6% last week.
According to OECD data, China’s economy will grow by 8.5% this year. But according to survey data, as officials try to contain the new coronavirus outbreak, growth may stagnate in August. A full-scale regulatory crackdown on private companies may further drag down economic activity, and China is preparing for the possible collapse of Evergrande.
After the fate of the large real estate developer came and went after the deadline last week, the company did not provide an update on whether it plans to pay bondholders nearly $84 million in interest.
Importance: Evergrande’s total liabilities are approximately US$300 billion. Some analysts worry that the disorderly collapse may bring shocks through the financial system and economy, which will trigger a “Lehman Brothers” moment in China. Real estate and related industries account for about 30% of China’s GDP.
If needed, can Europe make up for the shortcomings? This remains to be seen.
Germany’s Ifo business climate index fell in September, indicating that the recovery of Europe’s largest economy is losing momentum. IHS Markit stated that business activity in the Eurozone this month “grew at a markedly slower rate”, reflecting bottlenecks in the supply chain and concerns about the pandemic.
The United States, China, and Europe are likely to be in trouble for the rest of this year. As inflation continues to remain high, policymakers will face a series of difficult decisions.
“The most likely outcome is that the global recovery will continue. Despite the slowdown, inflation will peak in the next few quarters and then fall back next year. Central banks will withdraw policy support in a gradual and well-signaled manner,” Shearing of Neal Capital Economics Wrote recently.
Mark Benioff wants to talk about Facebook
“Look at how it affects the world. You can talk about the political process. You can talk about the climate. You can talk about the pandemic,” Benioff said. “In every major topic, it has to do with the distrust that is happening, especially the distrust broadcast by social networks. It must stop now.”
The technology billionaire called on Congress to crack down on Facebook’s false information problem.
Benioff said: “I own Time magazine and I am responsible for the content on my platform,” adding that CNN and other media also need to take responsibility. “As for Facebook, they are not held accountable. So they have no government incentives. This must change.”
Tuesday: US consumer confidence; Micron earnings
Wednesday: EIA crude oil inventories, Evergrande bonds mature
Thursday: US unemployment claims; CarMax earnings; China Purchasing Managers Index
Friday: U.S. personal income and inflation data; Eurozone inflation