Lockdowns, labor shortages, price surge sapping recovery

Europe 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 Thursday.

In its latest economic forecast, the commission said that sporadic pandemic-related lockdowns in some parts of Europe, together with emerging labor shortages, were adding to the disruptions, while inflation has hit a 10-year high.

Europe’s economy rebounded this year from the pandemic faster than expected, and regained prepandemic levels of growth during the summer. Among the 28 countries in the European Union, economic output is now expected to grow 5% this year, slightly better than a forecast made a few months ago — an unusually robust rebound after pandemic lockdowns shuttered the economy last year.

Growth will slow to a 4.3% pace next year and then decelerate to 2.5% in 2023, the commission said.

Europe spent hundreds of billions of euros to keep workers furloughed during national shutdowns, and such programs have helped millions of people stay in their jobs and avoid a surge in unemployment, the report said. About 1.5 million jobs were created from April to June, and nearly as many workers exited job retention schemes.

As in the United States and Britain, however, labor shortages have been plaguing industries that were quick to reopen, especially restaurants and parts of the retail sector. At the same time, there are still large numbers of people who are jobless and people who are available to work but not actively looking, the report said.

While the economic rebound has been swift, the surge in inflation is likely to weigh on the finances of Europe’s households and businesses.

A jump in natural gas prices has led to higher electricity bills. Altogether, the price of goods, services, energy and food jumped 3.4% in September from a year earlier, and even without volatile food and energy prices, the inflation rate is the highest in a decade. Inflation is estimated to have climbed to 4.1% in October.

But prices have jumped because of pandemic reopenings, the commission noted, so such pressures are expected to fade over the next year, the commission said.