Europe's Economic Recovery Faces Fresh Threats from Rising Energy Prices and Supply Chain Bottlenecks

Strategic Insights -

Europe's economy is facing fresh threats to its pandemic recovery as energy prices surge at a "tumultuous pace" and bottlenecks in the supply chain dampen growth and slow production, the European Commission said on Thursday. The commission's latest economic forecast reveals that sporadic pandemic-related lockdowns, emerging labor shortages, and a 10-year high inflation rate are adding to the disruptions. Despite a swift economic rebound this year, with Europe's economy regaining prepandemic levels of growth during the summer, growth is expected to slow to 4.3 percent next year and then decelerate to 2.5 percent in 2023.

Key Takeaways:

  • The European economy is expected to grow 5 percent this year, slightly better than a forecast made a few months ago.
  • Growth will slow to a 4.3 percent pace next year and then decelerate to 2.5 percent in 2023.
  • Labor shortages have been plaguing industries that were quick to reopen, especially restaurants and parts of the retail sector.
  • About 1.5 million jobs were created from April to June, and nearly as many workers exited job retention schemes.
  • The inflation rate is the highest in a decade, with a 3.4 percent jump in prices in September from a year earlier.
  • Inflation is estimated to have climbed to 4.1 percent in October.
  • The price of goods, services, energy, and food jumped 3.4 percent in September from a year earlier.
  • The European Commission has spent hundreds of billions of euros to keep workers furloughed during national shutdowns.

Statistics:

  • 5 percent: European economy growth rate for 2022.
  • 4.3 percent: European economy growth rate for 2023.
  • 2.5 percent: European economy growth rate for 2024.
  • 3.4 percent: Jump in prices in September from a year earlier.
  • 4.1 percent: Estimated inflation rate in October.
  • 1.5 million: Jobs created from April to June.
  • 1.5 million: Workers who exited job retention schemes.
  • 28: Countries in the European Union.
  • Hundreds of billions of euros: Amount spent by the European Commission to keep workers furloughed during national shutdowns.

Sources:

  • Reuters, "Europe's economic recovery faces new threats from rising energy prices and supply chain bottlenecks," October 2022.
  • European Commission, "Economic forecast: Slowdown and inflation pressures," October 2022.
  • European Commission, "European Economic Forecast Autumn 2022," October 2022.