Activity in manufacturing solid service sector severely affected.
According to the European Central Bank (ECB), the second wave of pandemics is clearly affecting the economy in the euro area. The monetary authorities assume that economic output has contracted in the final quarter of last year, as they announced in their economic report published on Thursday.
In the manufacturing sector, activity could continue to hold its own. “In the service sector, however, it is massively affected by the increase in the number of infections and the recent restrictions on social contacts and mobility,” the report said.
Data and our own economic forecasts indicate that the short-term economic consequences of the pandemic will be stronger than previously assumed. The inflationary weakness will also last longer than previously thought.
The ECB has launched extensive aid programs for the economy hit by the pandemic. At the interest rate meeting in December, among other things, she increased her pandemic emergency program PEPP by 500 billion euros to a volume of now 1.85 trillion euros. This was the second increase. The central bank also extended the purchases until at least the end of March 2022.
