Eurozone recovery stalls as fear of delta variant grips Continent

THE eurozone’s recovery is showing signs of stagnating in live economic indicators tracked by forecasters as the delta variant fears grip the region.

Economists have warned that the region’s rebound may have peaked after real-time signals suggested the recovery was suffering a summer lull following a stronger-than-expected second quarter.

Jefferies and Oxford Economics’ recovery trackers for the region – which cover a range of signals such as job postings, movement, web traffic and energy consumption – have slipped back in recent weeks.

Jefferies’ economic activity tracker has fallen from 89pc of pre-covid levels in early July to 85pc, while Oxford Economics’ weekly gauge recently declined for the first time since mid-april.

Google’s movement indicator, a closely watched signal during the crisis, has also stalled and is in retreat in some countries, such as France. Chris Hare, an HSBC economist, said the eurozone economy “continues to show resilience to the delta wave” but he added that growth might have peaked. “The mobility data suggest that monthly growth has now slowed following the past easing of restrictions,” he said.

Eurozone GDP jumped 2pc in the second quarter but Covid cases have escalated in the past month.

The rapidly spreading delta variant has become the most dominant strain of Covid within Europe with interventions such as vaccine passports being introduced in France, Italy and Greece.

The impact of the variant, thought to have originated in India, is now considered the key downside risk to the eurozone’s recovery, particularly if soaring cases tempts consumers to voluntarily social-distance.

“Surveys have already shown some impact on confidence for businesses and consumers, with optimism about the months ahead declining,” said Bert Colijn, a senior economist at ING.

“With mobility flattening, it could be that we’re already seeing an impact on behaviour as well.”

However, he added that the mobility slowdown was likely to be seasonal and any summer lull would be a “pause” rather than the “end of the economic rebound”.

Rory Fennessy, at Oxford Economics, said signs of stagnation suggested “a plateau rather than a marked turning point in activity. The delta variant is a key downside risk, with further falls in the tracker possible if consumers adopt voluntary social distancing”.