The strong momentum of the European economy will come to an almost complete halt early next year. Persistent inflation, a hiring freeze and rising interest rates will be clearly negative factors. But a substantial acceleration in wages and a strengthening of public investment should support domestic demand and steer the economy towards a modest recovery starting from the middle of next year.
So write the analysts of S&P according to which at the end of 2022, manufacturing production in the EU stands at an all-time high, even if energy-intensive sectors have reduced activity due to higher costs. The hiring cycle is still strong and is driving consumption.
The rate cycle is probably coming to an end, but it’s not over yet. S&P expects the ECB to hike rates another 75 basis points before halting hikes. Furthermore, its budget could shrink by almost 3,000 billion euros in three years.