Price rises must be met with moderation
EU is undergoing strong recovery and is well on track to reach pre-crisis GDP level this year
But businesses are experiencing strong upward price pressures including surging energy prices. Which pushes up their costs.
Today, BusinessEurope published its Autumn 2021 Economic Outlook. Following publication BusinessEurope's Director General Markus J. Beyrer commented: "The EU economy is undergoing a strong recovery which gives ground for optimism for Europe's businesses after a long period of almost unparalleled hardship. But Europe's exports and production are increasingly suppressed by growing strains and bottlenecks in global supply chains. Energy prices have also surged. These factors push up input prices for companies and cause production to come to a halt due to lack of necessary materials, threatening to blunt the upturn.
There is a clear risk that even short-term price rises could translate into longer-term inflationary pressures. Adding to the wage pressures, bottlenecks have also appeared in the labour market, with the proportion of firms experiencing hiring difficulties back at pre-pandemic levels.
Wage moderation will be important in ensuring that temporary price rises do not lead to a damaging wage-price spiral, which would risk damaging Europe's global competitiveness and cause permanently higher inflation."
In more detail BusinessEurope Autumn Economic Outlook shows:
- We project the EU27 economy to grow by 4.8% this year, followed by 4.3% next year.
The recovery is propelled by consumer-led rise of domestic spending, with retail sales now 6% above the 2019 average.
A household saving rate of around 21%, well above the pre-crisis average of around 12%, provides scope for further increases in demand, particularly for services, provided that consumer confidence is not damaged by either price rises or virus concerns.
- In contrast, production in the EU is suffering from supply chain bottlenecks, ranging from computer chips to shipping containers, with industrial production falling 1.5% from July to August.