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Europes Economy to Outpace U.S. in Upending of Past Roles
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The euro area economy is for once set for a sprightlier recovery from crisis than the U.S., thanks to starkly different responses to the coronavirus.To get more news about WikiFX, you can visit wikifx news official website.
Americas failure to get a grip on the pandemic is putting the brakes on its rebound compared with Europe, where many former virus hot spots managed to resume economic activity without causing a similar surge in infections.
Crucial for a sustainable recovery is confidence that the virus is no longer out of control, and Europes relative success may help encourage shoppers to spend and businesses to invest, further propelling demand and growth. The region has also done a better job of protecting jobs and incomes, at least for now, with furlough programs keeping millions of workers on payrolls.
Daily Activity Indices
In the race to recover, Europe extends its lead over the U.S. and U.K.
Sources: Bloomberg Economics, Google, Moovitapp.com, German Statistical Office, BloombergNEF, Indeed.com, Shoppertrak.com, Opportunity Insights
According to JPMorgan Chase & Co., Europe will do better because it has “broken the chain” that links mobility and the virus. Goldman Sachs Group Inc. has cited effective virus control as one reason it expects a “steeper and smoother rebound in the euro area than elsewhere.”
“It‘s very clear that the euro area turned down more sharply but we also expect it to bounce back more sharply,” said Jari Stehn, chief European economist at Goldman Sachs. “It’s pretty rare that the euro area would outgrow the U.S. over a horizon of one to two years.”
Since 1992, the U.S. has outperformed the euro area in all but eight years, according to IMF data. Although the euro area managed to grow when the financial crisis hit in 2008 and the U.S. shrank, in 2009 the U.S. contraction of 2.5% was far shallower than the euro areas 4.5%.
Aggressive lockdowns mean the euro area is set for a sharper second-quarter contraction than the U.S., something that will be seen in GDP figures due this week.
The euro-area economy probably shrank 12% in the three months through June, according to a Bloomberg survey. The U.S. contraction, on an annualized basis, is forecast to be 35%, or a roughly 10% decline quarter-over-quarter.
But high-frequency data suggest Europe is on the mend faster, and Bloomberg Economics estimates that the lead has widened recently.
“Having been hit hardest it‘s pretty impressive that we think that Europe will recover more fully,” said Bruce Kasman, chief economist at JPMorgan. “They’ve broken that link -- the mobility numbers are going up” without a resurgence of the virus, thanks to better contract tracing, mask-wearing and social distancing measures, he said.