The Euro Area started the year with little economic growth relative to the previous quarter, due to a slight contraction in consumption levels. GDP, however, is significantly higher than in the same quarter of the previous year, when COVID was still holding back economic activity. Since then, consumption levels and government spending have spiked and international trade has risen again. The economic recovery, production bottlenecks of Chinese manufacturing firms that were forced to stop during the pandemic, soaring energy prices, and uncertainties related to the Russian invasion of Ukraine, have contributed to increasing inflation rates, 2.19 percent relative to the previous quarter and 6.15 percent relative to the previous year. According to the OECD economic outlook, annual inflation is expected to stay at around 3 percent in the first half of the year, and to decrease to 2 percent towards 2023. GDP is expected to grow at an annual rate of 3.5-4.5 percent in the coming quarters, while unemployment is expected to decrease slightly, but steadily, towards 2023.

July 2022