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The world’s largest economies on both sides of the Atlantic have a good chance of regaining the ground lost to the coronavirus pandemic by the end of the year, much faster than economists had previously feared.
Economists have revised their forecasts for the economic performance of the United States and the eurozone after this week’s data showed that both economies are showing more resilience than expected.
The spending of American households is beginning to do so show the effects of the $ 1.9 million stimulus from Joe Biden and the eurozone contraction of the first trimester due to the latest wave of Covid-19, it was lower than economists had expected, the figures released on Friday showed. The progress of the block a deployment of vaccines Consumer spending is expected to increase in the coming months as companies in the services sector reopen.
As a result, the likelihood of both economies regaining their pre-pandemic production level before the end of the year is growing, a sharp improvement in the April forecasts of the IMF, which suggested that this would not happen until well into 2022.
After the data was released, James Knightley, chief international economist at ING Bank, said: “Wowzers, the US economy is hot.” Citi’s Giada Giani said European indicators had been “much stronger in April than we had anticipated”.
U.S. growth figures for Thursday’s first quarter left the economy’s output just 0.9% below its pre-pandemic peak and Washington stimulus controls boosted household incomes much more than spending, and left significant resources unused.
Economists expect a rise in consumption in the second quarter to help the U.S. regain the remaining ground lost during the pandemic in late June.
U.S. food, transportation and recreation service companies reopen, and Ian Shepherdson, U.S. economist at Pantheon Macroeconomics, said the scope for growth will accelerate as the economy reopens. “It’s considerable.”
He expects the U.S. economy to reach its pre-pandemic economic level before the end of the year. Recently, last month, the IMF predicted that only a full U.S. recovery would occur mid-2022.
Despite this, the outlook has also improved significantly in the euro area recording a double-dip recession in the first quarter in figures released Friday. Recent data has been better than economists had feared.
The area’s economy had shown “resistance,” according to Maddalena Martini of Oxford Economics, who said the data “sends encouraging signs around the short-term outlook.”
Eurozone output is still 5.5% below its pre-pandemic peak, but economists said there was room for rapid growth in the second half of the year. Bert Colijn, an economist at ING Bank, said that “the image of a scarce eurozone economy will change rapidly” as the spread of coronavirus slows and the European vaccination program accelerates.
Citi economists said there was a chance the eurozone would regain its pre-pandemic production level before the end of the year, while Holger Schmieding, chief economist at Berenberg Bank, predicted an “increase” in demand from May that would bring production above that level long before the end of 2021.
In April, said the IMF Eurozone activity levels would remain below the pre-pandemic level of the bloc until well into 2022.
Faster-than-expected growth and strong spending on both sides of the Atlantic will put pressure on central banks to limit emergency stimulus measures, which were launched last year to contain the crisis.
But the U.S. Federal Reserve and the European Central Bank are likely to resist any action to remove the heat from the recovery. Central bankers in the world’s major advanced economies have been unanimous in saying they want to see strong evidence of higher inflation before reducing pandemic stimulus measures.
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