The French economy is stuck between three developments with different effects: an inflation shock that is denting consumer spending, a negative supply shock (supply constraints in industry) and the lifting of public health restrictions (benefiting growth as of the second quarter, having held it back in the first quarter). Government measures that have limited inflation were unable to prevent negative growth in the first quarter. However, the positive impact of the lifting of public health restrictions and a rebound in purchasing power should allow for a recovery towards positive growth in the third quarter (+0.3% q/q).
Once protected by the logic of “whatever the cost”, household purchasing power in Europe is now threatened by inflation. After the pandemic, public policies are being solicited once again to help reduce the loss of purchasing power, albeit without really succeeding. In 2022, the real disposable income of Eurozone households is expected to decline by about 2.5%. Consumption is still rising, but only because the household savings rate is declining, a trend that masks extremely diverse situations.
Unsurprisingly, the 16 June meeting of the Bank of England’s Monetary Policy Committee (MPC) led to a further increase in its policy rate, the fifth consecutive 25 basis point increase, taking it to 1.25%. This tightening of monetary policy, relatively modest when compared to the Fed’s 75bp hike, aims to control inflation, which is continuing to rise steeply (2.5% m/m NSA in April, giving a year-on-year figure of 9%), without putting excessive constraints on an economy already hit by the inflation shock.
The latest economic data from INSEE have provided detail on the timing and scale of the purchasing power shock to household consumption, with three figures standing out: the 1.8% q/q fall in the purchasing power of gross disposable income over the first quarter; the revised fall of 1.5% q/q in household consumption (from -1.3% in the initial estimate); and the downgrade in GDP growth to -0.2% q/q, from 0% in the initial estimate.
The Covid-19 pandemic continues to slow around the world. According to the latest figures from Johns Hopkins University, 3.3 million new cases were recorded around the world in the week of 1 to 7 June, a 4% drop on the previous week. On a regional level, the epidemic continues to ease in Africa (-24%) and Asia (-18%), whilst the number of new cases in Europe has stabilised after two months of substantial falls. New case numbers in South America continued to rise strongly (21%), whilst North America also posted a small increase. Meanwhile, 67% of the world’s population has now received at least one dose of a Covid-19 vaccine.
The epidemiological situation arising from the Covid-19 pandemic continues to improve in most regions of the world. For the first time since mid-November 2021, the number of new cases has dropped below the symbolic level of 3.5 million per week (7-day moving average). Over the same period, visits to retail and leisure facilities held at pre-pandemic levels in Belgium, Germany and France, and are approaching normal levels in Italy. Retail and leisure mobility still falls short of pre-pandemic levels in the other countries (United States, Spain, the UK and Japan).
According to the latest data from Johns Hopkins University, more than 4 million new cases were recorded around the world between 12 and 18 May, an increase of 5% on the previous week. This represents the first weekly increase since the beginning of February. Looked at on a regional level, the situation in Europe improved significantly (-20%), and that in Africa stabilised. However, case numbers continued to climb in North and South America (17%). Asia saw the first increase after two months of virtually continuous falls. Meanwhile, 66% of the world’s population has now received at least one dose of a Covid-19 vaccine.
The sharp rise in energy prices since April 2021 has been the main driving force behind the current surge in Eurozone inflation. The outbreak of war in Ukraine on 24 February accentuated this trend, sending the energy component of the harmonised index of consumer prices (HICP) up 44.4% y/y in March 2022. Faced with this situation, the governments of the four main Eurozone economies under review in this article have acted to try to buffer the shock on economic players, and notably on household purchasing power, via direct subsidies, tax cuts, price regulations and measures to boost nominal incomes
Inflation is continuing to spread among the various components of the consumer price index (CPI). The energy component fell slightly in April (-2.5% m/m) after the government introduced a fuel rebate, but that decline was more than offset by faster inflation in other components of the CPI. Food prices in particular rose by 1.4% m/m in April, the sharpest increase for 20 years, beating figures seen in previous waves of food price inflation in 2007-08 and 2011. Food was the main contributor (0.2 points) to monthly inflation in April (0.4% m/m).
The downward trend in the weekly number of new cases of Covid-19 continued in most regions of the world. For the first time since mid-November 2021, the number of new cases for the week fell below the symbolic level of 4 million on average for a moving seven-day period. Some 3.6 million new cases were recorded between 5 and 11 May, a fall of 11% on the previous week. On a regional basis, case numbers continued to fall drastically in Europe (-20%) and Asia (-17%), but rose in Africa (42%), North America (24%) and South America (10%). The sharp rise in Africa in recent weeks is linked to soaring cases in South Africa. Meanwhile, 66% of the world’s population has now received at least one dose of a Covid-19 vaccine
For the first time since December 2021, the number of new global Covid-19 cases for the week has fallen below the symbolic level of 5 million (average for a moving seven-day period). Some 4.3 million new cases were recorded between 26 April and 3 May, a fall of 15% on the previous week. The fall in infections continued in Asia (-24%) and Europe (-17%), but other regions indicated an increase in case numbers: North America (+11%), South America (+8%) and Africa (+4%). To date, 12 billion vaccine doses have been given around the world, taking the share of the global population to have received at least one jab to 65.4%. Despite this, in some parts of the world overall vaccine coverage remains low, with just 15.8% of people in low income countries having received at least their first dose.
According to the latest figures from Johns Hopkins University, 5.9 million cases of Covid-19 were reported worldwide between 13 and 19 April (down 24% relative to the previous week), the lowest level since the end of December 2021. The number of cases continued to fall in Europe and Asia (down 26%), South America (down 24%) and Africa (down 13%), while a further increase was seen in North America (7%) for the second time in a row (chart 1). To date, the threshold of 11 billion vaccine doses has been reached, including 1.8 billion follow-up doses. This means that around 65% of the worldwide population has received at least one dose of a vaccine (chart 2).
Although Spain is not the European country with the highest “structural” exposure to the war in Ukraine, it has been hard hit by the energy price shock. Inflation will certainly exceed 10% year-on-year this spring. Higher petrol prices have triggered protests that have spread across the country, disrupting economic activity even though the impact on growth should be modest. Job creations were still resilient in Q1. Household confidence as well as business expectations of future orders both dropped sharply with the outbreak of the war in Ukraine, which will have an impact the dynamics of hiring. The recovery of the tourism industry will partially offset the loss of consumer spending due to the erosion of household purchasing power in Spain.
The Covid-19 pandemic slowed worldwide for the second consecutive week, with a significant 14% decline in the number of new cases reported between 31 March and 6 April compared to the previous week. New fact to notice: this improvement benefitted all regions (chart 1): South America and Africa (-27%), Asia (-20%), Europe (-11%) and North America (-5%). Meanwhile, vaccination campaigns continue to progress. To date, 11.4 billion doses of the vaccine have been administered worldwide, bringing to 65% the share of the global population that has received at least one dose of the Covid-19 vaccine.
A priori, rising inflation and inflation expectations, reflecting robust growth in demand and economic activity, should boost household spending by reducing real interest rates. Today’s situation is different. In many advanced economies, inflation is exceptionally high and to a considerable degree explained by negative supply shocks. In the EU and the euro area, household confidence recorded a big drop in March. Although unemployment expectations have increased, the main reason seems to be concern about high and rising inflation. Eurozone consumer confidence measures provide information about spending up to three quarters into the future. Given their recent decline, one should expect below-average consumer spending growth over the coming months
After a week of stabilisation, global Covid-19 case numbers have started to fall again. 11 million new cases were recorded between 24 and 30 March, a 9% drop on the previous week. In more general terms, the number of new cases has continued to fall in North and South America, whilst Asia saw its first fall in case numbers after two months of near-continuous increases. In Europe, by contrast, the situation was stable for the second week in a row.
After a week of rises, figures for the Covid-19 pandemic have stabilised worldwide, albeit at a high level. 12 million new cases were recorded around the world in the week of 17-23 March, a figure similar to that in the previous week. However, the picture is uneven around the world.
After trending downwards since the end of January, Covid-19 figures have been ticking upwards again around the globe: 11.7 million new cases were reported between 10-16 March, a 9% increase over the previous week. This increase is due to the highly contagious Omicron variant and to the easing of health restrictions in several countries. The increase in the number of new cases was especially striking in Asia and Africa, up 15% and 12%, respectively.
With the Omicron variant now becoming dominant in most countries, the number of new Covid-19 cases worldwide continues to fall. However, the pace of this decline has slowed during the week of March 3-9 (-2% compared to the previous week). By region, South America and Africa saw big falls, at 38%, followed by North America (-30%) and Europe (-7%). In contrast, case numbers in Asia rose by 15%. Meanwhile, 64% of the world’s population has now received at least one dose of a Covid-19 vaccine.
Purchasing power is a major concern for French households, a hot topic that is currently acute. For the first time since 1989, inflation is expected to rise above the 3% threshold for most of the year 2022. Aggregate household revenue is growing at a dynamic pace, offsetting the observed inflation impact. Purchasing power has increased by 2.3% in 2021 and a slight gain at 0.2% is even possible in 2022. Strong job creations have bolstered the total disposable income of French households. Looking at the average compensation, purchasing power has increased by 1.1% in 2021, but is expected to contract by 0.6% in 2022
According to the latest data from Johns Hopkins University, more than 22 million new cases were recorded around the world between 27 January and 2 February, a fall of 3% on the previous week. Nearly 61.3% of the world’s population has now received at least one dose of a Covid-19 vaccine. The last two weeks have brought an increase in visits to retail and recreation facilities in Spain, Belgium, France, Germany, Italy and the USA. The UK saw a bigger increase, probably due to the removal of nearly all health protection measures, whilst the downward trend in Japan continued.
The number of new daily cases of Covid-19 has continued to rise in most parts of the world. Over the same period, several individual countries saw falls (Chart 4, black line): United Kingdom (-11%), USA (-9%), Argentina, Spain (both -5%), and Italy (-3%). Meanwhile, Japan (109%), Brazil (70%) and Germany (58%) stood out for their soaring case numbers. At the same time, vaccination doses hit the symbolic 10 billion mark.
On a weekly basis, the highest number of new cases in a single country was in the USA, followed by France and India, which stands out with a 117% surge in cases of). Visits to retail and leisure facilities remain on a downward trend in Spain and Italy, and although the most recent figures in Germany, Belgium, France, the US and the UK show an increase, the trend remains downward. In Japan, mobility now is falling fairly sharply after previously showing positive momentum for several months.
The highest number of new cases in a single country was the was the United States (3,141,071, a 100% increase from the previous week). It was followed by the UK, France, Italy and Spain. Some 9.33 billion Covid-19 vaccine doses have been administered worldwide since vaccination campaigns began in the fourth quarter of 2020, including 547 million booster doses. Nearly 60% of the world’s population has now received at least one dose of a Covid-19 vaccine.
In the week of 8 to 14 December, 4.31 million new Covid-19 cases were reported worldwide, a 5.1% increase compared to the previous week. The biggest weekly increase was in Africa (+111%). New cases also soared in North America, up 23%, due to the increase in contaminations following the Thanksgiving holidays (chart 4, black line). Over the same period, a decline in new cases was observed in South America (-7.4%), Asia (-5%) and Europe (-0.2%), but in Europe this comes after an exponential increase in previous weeks (chart 1). As to the spread of Covid-19 variants, several countries reported confirmed cases of Omicron recently, bringing the total to 67 countries.
