Business Maverick: Europe’s Economy to Outpace US, Upending Past Roles

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The euro area economy is for once set for a sprightlier recovery from crisis than the U.S., thanks to starkly different responses to the coronavirus.

to get a grip on the pandemic is putting the brakes on its rebound compared with Europe, where many former virus hot spots managed to resume economic activity without causing a similar surge in infections.Crucial for a sustainable recovery is confidence that the virus is no longer out of control, and Europe’s relative success may help encourage shoppers to spend and businesses to invest, further propelling demand and growth.

“It’s very clear that the euro area turned down more sharply but we also expect it to bounce back more sharply,” said Jari Stehn, chief European economist at Goldman Sachs. “It’s pretty rare that the euro area would outgrow the U.S. over a horizon of one to two years.”. Although the euro area managed to grow when the financial crisis hit in 2008 and the U.S. shrank, in 2009 the U.S. contraction of 2.5% was far shallower than the euro area’s 4.5%.

The euro-area economy probably shrank 12% in the three months through June, according to a Bloomberg survey. The U.S. contraction, on an annualized basis, is forecast to be 35%, or a roughly 10% decline quarter-over-quarter. “Having been hit hardest it’s pretty impressive that we think that Europe will recover more fully,” said Bruce Kasman, chief economist at JPMorgan. “They’ve broken that link — the mobility numbers are going up” without a resurgence of the virus, thanks to better contract tracing, mask-wearing and social distancing measures, he said.

 

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