25 August 2021
Europe COVID-19 tracker Free to View Economics - Europe
Past peak growth; tourism returns
Infection rates and ICU occupancies remain broadly stable Fabio Balboni Senior Economist Data are pointing to slowing growth momentum... HSBC Bank plc
...but the tourism season is finally showing signs of revival
Slight up-tick in cases The number of cases are still broadly stable across Europe, although they are rising more rapidly in Germany and the UK, and intensive care unit occupancy rates for COVID-19 patients remain relatively contained. Most European countries are getting closer to the vaccination target of 70% of the population, which they had set out to meet by the end of the summer. Meanwhile, the debate is continuing on early signs of waning immunity from vaccines and the efficacy of vaccines in preventing transmission (FT, 19 August). Data from Israel are worrying in terms of possible waning protection (Chart 9-10). The French Health Minister said citizens over-65 are likely to be offered a booster shot starting in September (Anadolu, 23 August). UK Health Minister Sajid Javid said in early August that a booster campaign for over-50s would kick off in early September (even though the press is reporting that boosters may be limited to most vulnerable; Telegraph, 19 August). Past peak growth The August PMIs indicated that the pace of service sector expansion eased slightly, both in the eurozone and the UK. The manufacturing PMIs also dipped again, even though there are some early signs of alleviating supply-side bottlenecks (Chart 18). The ifo survey in Germany gave a more concerning signal, with expectations surprising significantly to the downside and pointing to fading growth momentum, possibly also related to the slowdown in Asia. So it seems we might be past the peak in terms of sequential growth rates in Europe. Even then, due to the stronger-than- expected Q2, we increased our 2021 eurozone growth forecasts to 4.9% from 4.4%, while we nudged down our UK growth forecasts to 6.7% from 7.1%. Employment indicators, though, remain solid on both sides of the Channel. In the eurozone, short- time worker numbers are falling fast – we estimate there were some 5m workers in the eurozone in July, down from 10m in June (Charts 25-26) – which bodes well for the ongoing winding down of the schemes. There are increasing signs of recovery in tourism, particularly domestic, which might be starting to generate some pockets of inflationary pressures. In Spain, the nights spent in tourist accommodation rose sharply in July, reaching 60% of pre-crisis levels. In Italy, the tourism and trade association CNA registered a 20% rise in domestic tourists in July relative to 2019 (26 July). Even foreign travel is starting to resume. Despite fairly elevated COVID-19 cases, in the first half of August international passenger traffic in Greek airports stood at 81% of 2019 all-time high levels, from 66% in July. Traffic at the Athens airport was at c70% of pre-pandemic levels, with the most popular islands doing even better, at 85%, and Santorini above 2019 levels (Ekathimerini, 23 August). Data from International aviation show a significant recovery of travel across the board within the continent, though less so for the UK, at least so far (Charts 29-34).
This is an abridged version of a report by the same title published on 25-Aug-21. Please contact your HSBC representative or email AskResearch@hsbc.com for more information.
Disclosures & Disclaimer Issuer of report: HSBC Bank plc This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at: https://www.research.hsbc.com
Free to View ● Economics - Europe 25 August 2021
COVID-19 cases relatively stable this week
1. European infection numbers have largely stabilised... COVID-19 cases* in the eurozone big 4 and UK 160000 160000
120000 120000
80000 80000
40000 40000
0 0 Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Germany France Italy Spain UK
Source: Refinitiv Datastream, HSBC. Note: *7-day moving average.
2. ...even though there were noticeable up- 3. New cases are rising across the board in ticks in Germany and the UK this week Germany, but less among the elderly
7dma Daily COVID-19 cases per 100k of population 7dma 000s Germany : New COVID-19 cases by age (7 dma) 000s 60 60 10 10 50 50
40 40 8 8 Thousands 30 30 6 6 20 20 10 10 4 4 0 0
2 2
UK
Italy
Spain
Ireland France
Norway 0 0
Belgium
Sweden Portugal
Germany Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Switzerland Netherlands 0-4 5-14 15-34 7-day to 17-Aug 7-day to 24-Aug 35-59 60-79 80< Source: Refinitiv Datastream, HSBC. Note: Weekend numbers are reported as 0 so Source: Macrobond, HSBC. “7-days to” does not include Saturday and Sunday.
4. ICU occupancy rates by COVID-19 patients 5. ...and have eased slightly in Spain after remain low relative to previous waves... last week's spike
Total COVID-19 related ICU patients (7 dma) Total % Share of intensiv e cart units occupied by % 8000 8000 COVID-19 patients in selected Spanish regions 50 50 6000 6000 40 40 30 30 4000 4000 20 20 2000 2000 10 10 0 0
0 0 Spain
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Madrid Catalonia Germany France Italy C. Basque As of 9-Feb As of 10-Aug As of 17-Aug As of 24-Aug UK* Spain Source: Macrobond, HSBC. Note: *medically ventilated. Source: El Diaro, Ministry of health, HSBC
We acknowledge the assistance of Yash Dewan, HSBC Bank plc, in the preparation of this report.
2 Free to View ● Economics - Europe 25 August 2021
Vaccinations aren’t eliminating COVID-19
6. Overall, European countries show relatively high rates of vaccination…
Number Number of v accine doses administered per 100 people Number 180 180 150 150 120 120 90 90 60 60 30 30
0 0
UK (22 Aug) (22 UK Aug) (23 US
Italy (23 (23 Aug) Italy
Malta (22 Aug) (22 Malta
Spain (22 Aug) (22 Spain
Ireland (22 Aug) (22 Ireland
France (22 Aug) (22 France Poland (22 Aug) (22 Poland
Finland (23 Aug) (23 Finland Aug) (23 Greece
Norway (22 Aug) (22 Norway
Sweden (20 Aug) (20 Sweden
Bulgaria (23 Aug) (23 Bulgaria
Portugal (23 Aug) (23 Portugal
Romania (22 (22 Aug) Romania Denmark Aug) (22 Denmark Germany (22 Aug) (22 Germany Source: Our World in Data, HSBC.
7. …but the speed of vaccination continues 8. ...with many European countries now to slow, although it is recovering in France… getting closer to the 70% target
Per mn Daily COVID-19 v accine doses Per mn % Share of population fully v accinated against COVID-19 % 14000 14000 70 70 12000 12000 60 60 10000 10000 50 50 8000 8000 40 40 6000 6000 30 30 4000 4000 20 20 2000 2000 10 10 0 0 0 0 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Germany France Italy EU Germany France Spain UK US UK Spain Italy Source: Our World in Data, HSBC. Source: Macrobond, HSBC.
9. Despite high vaccination rates, Israel is 10. ...and the average age of people ending now showing soaring case numbers... up in hospital has increased again after the initial decline
000s. Israel: COVID-19 cases and vaccinations No. Years Israel: Av erage age of COVID-19 Years 10.0 80 hospitalisations 75 Vaccinations 75
7.5 60 70 begin 70 Thousands 65 65 5.0 40
60 60 2.5 20 55 55
0.0 0 50 50 Dec-20 Feb-21 Apr-21 Jun-21 Aug-21 New cases - smoothed (LHS) 45 45 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Vaccines administered/100 people (RHS) Source: Macrobond, Our World in Data, HSBC. Source: Israeli government, HSBC.
3 Free to View ● Economics - Europe 25 August 2021
Activity levels stabilising at around pre-pandemic levels
11. UK mobility has started to increase 12. …and remains on a gradual upward again… trend also in the eurozone
Index UK: Stringency of restrictions Dev iation Index Eurozone: Stringency of restrictions Dev iation and retail mobility from baseline and retail mobility from baseline 0 20 0 20
20 0 20 0
40 -20 40 -20
60 -40 60 -40
80 -60 80 -60
100 -80 100 -80 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Aug-21 Stringency score (LHS, inverted) Mobility (RHS) Stringency score (LHS, inverted) Mobility (RHS) Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC. Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC
13. Retail and recreation activity is back to pre-pandemic levels in many places… % from baseline Europe and US: mobility data - retail and recreation* % from baseline 20 20 0 0 -20 -20 -40 -40 -60 -60 -80 -80 -100 -100 Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Germany France Italy Spain UK Sweden Norway US Source: Google, HSBC. Note: *7-day moving average.
14. …while the holiday season may be playing a role keeping people away from work % from baseline Europe and US: mobility data - w orkplaces* % from baseline 20 20 0 0 -20 -20 -40 -40 -60 -60 -80 -80 -100 -100 Mar-20 Jul-20 Nov-20 Mar-21 Jul-21 Germany France Italy Spain UK Sweden Norway US Source: Google, HSBC. Note: *7-day moving average.
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Free to View ● Economics - Europe 25 August 2021
Local restrictions start to be re-imposed in some countries
15. Latest on the restrictions from the major European countries Country Latest lockdown measures Germany To speed up the stalling vaccination campaign, Chancellor Merkel and the heads of the federal states on 10 August took actions to overhaul the outdated COVID-19 regulations and incentivise the take-up of vaccines. To this end, a so-called 3G-rule (3G: “geimpft, genesen, getestet” – “vaccinated, recovered, tested”) was implemented. Starting from 23 August, unvaccinated people (except children) are thus required to present a negative Corona test for indoor activities (e.g. restaurants, services, events, etc.). Moreover, from 11 October, tests will no longer be free of charge except for people who are medically not advised to get a vaccine shot (e.g. children, adolescents. or pregnant women). The 3G-rule will be reviewed every four weeks. But each federal state can decide on its own whether to suspend the 3G-rule in whole or partly as long as the 7-day incidence in a district is below 35 new infections per 100k inhabitants or the indicator system of the Federal state reflects a comparably low incidence and an increase of the number of infections is not to be expected as a consequence of the suspension of the rules. As of 25 August, 265 of the 401 districts exceed the 35-threshold, with 42 above the incidence threshold of 100. The following rules also apply: Contact restrictions and curfews no longer apply to vaccinated and recovered persons (those persons are no longer counted at private gatherings). Distance and hygiene regulations continue to apply nationwide. This also includes vaccinated or recovered persons. When using public transport or visiting shops, masks of the “KN95 of FFP” standards must be worn. An even stricter rule applies for employees and visitors of nursing homes, who have to wear FFP-2 masks for at least as long as there is not sufficient protection through vaccination. Restrictions (such as limited number of participants for clubs and parties) are still possible, and hygiene concepts must be presented at sporting events with more than 5,000 spectators. The maximum number of spectators is limited to 25,000. From 1 August 2021, there will be a general obligation to carry a proof of vaccination, recovery or a negative test for COVID-19 when entering Germany (irrespective from where and by which means of transport travellers are entering the country) for persons aged over 12 to avoid quarantine. Vaccinated or recovered persons do not have to be quarantined after returning from a “high-risk area”, which is defined as a region with particularly high numbers or where there is “evidence of “dangerous incidence of infection” (e.g. a new virus variant). France The government introduced strict additional restrictions at the start of the year, including a stricter curfew and travel restrictions. Full-time lockdowns (including closure of non-essential shops and services and further restrictions on domestic travel) were then put in place in 19 departments on 20 March, then extended to all metropolitan France on 3 April (with schools being closed for between three and four weeks, including the already planned spring holidays). Restrictions have started to be gradually eased since the end of April. Kindergartens and primary schools reopened on 26 April, followed by secondary and high schools on 3 May. All restrictions on domestic travel were also lifted on 3 May. On 19 May, non-essential shops, cultural places (museums, cinemas) and the outdoor part of bars and restaurants partially reopened, but with restrictions on capacity. Moreover, the start of the curfew was set at 9pm instead of 7pm. On 9 June, gyms and the indoor parts of bars and restaurants reopened (at 50% of capacity). The capacity limit for the outdoor part of bars and restaurants was lifted, while the one on cinemas and theatres was raised to 65%. The start of the curfew was delayed to 11pm instead of 9pm. Rules on remote working were eased. Finally, attendance at some events of more than 1000 people (festivals, shows) was authorised with a COVID-19 health pass. Travel rules were also eased on 9 June: all fully vaccinated people from EU and from some other ‘green’ countries are no longer required to show a negative virus test to enter France, with only a proof of their vaccination status being sufficient. The curfew was completely lifted on 20 June and masks outdoors are no longer mandatory effective 17 June. On 30 June, most existing capacity limits (shops, restaurants, gyms, cultural venues) were lifted. Nightclubs reopened on 9 July, but with strict protocols (capacity limit of 75% indoors and a required COVID-19 health pass). Due to the rapid spread of the Delta variant, President Macron announced on 12 July new measures to boost vaccination numbers, including mandatory vaccination for health care workers (controls will start to be held on 15 September) and the widening of the scope of activities requiring a COVID-19 health pass (i.e. a proof of vaccination or a negative test). From 21 July, health passes were required for all leisure and cultural places (like museums or cinemas) and from 9 August for bars, restaurants, shopping malls, hospitals and some transports (trains, planes). In addition, PCR tests will no longer be free of charge from this autumn (unless obtained with a medical prescription). Local restrictions (including a renewed curfew) were announced on 12 July for the overseas territories of Martinique and Réunion Island. Later in July, several costal departments (Pyrénées-Orientales, Corsica, Charentes-Maritimes and Gironde) implemented renewed local restriction measures (like mandatory mask wearing outdoors, early closures of bars and restaurants, and restriction on outdoor gatherings). More recently, a full lockdown has been implemented in some overseas territories (on 9 August for Martinique and 11 August for Guadeloupe). Spain On 9 May, the state of emergency expired and was not extended by the government. With that, the nationwide curfew also came to an end. The freedom to travel across regions has been re-established with no regions maintaining the external border closure in place (even though regions are still imposing travel restrictions in and out from specific areas within the regions). On Saturday 26 June, Spain also eased its face mask rules, making masks no longer necessary in outdoor settings where social distancing is observed. Some restrictions, though, remain in place at the regional level, and some were tightened recently with COVID-19 cases now back on the rise. Most regions impose limitations in terms of the maximum number of people allowed for gatherings and restrictions to the opening times for restaurants and bars. For example, Aragon brought forward the closing time of clubs to 12:30am and Navarra to 1am. Recently joining them, Catalonia announced that all non-essential activities, including bars, must close by 12:30am and social gatherings must be capped at 10 people. In addition, a 1-6am curfew has been reintroduced on 17 July in several municipalities, including Barcelona. The Valencia Community, Navarra and Cantabria also recently introduced a 1-6 am curfew. In the Madrid region and Andalusia, restaurants have to close at 1am and bars and clubs can remain open until 2am and 3am, respectively. Spain’s external frontier remains open. For entry, a proof of vaccination or a negative COVID-19 test is required. Even then, the UK maintaining Spain in the ‘amber’ list of countries requiring quarantine upon re-entry could be a setback for the ability of Spain to attract foreign tourists. Source: Country data, HSBC
5 Free to View ● Economics - Europe 25 August 2021
16. Latest on the restrictions from the major European countries (cont’d) Country Latest lockdown measures Italy Currently, all the Italian territory is in the ‘white’ category with hardly any restrictions (other than obligatory mask wearing indoors – since 28 June, masks are no longer required outdoors – and some social distancing requirements) although the press has been speculating that some regions might move back in the 'yellow' category with limited restrictions applying in the coming weeks due to the rising number of COVID-19 cases, but it seems unlikely this will happen before the end of the holiday season (La Repubblica, 6 August). In the COVID-19 decree approved on 18 May, restrictions were lifted based on the following steps. Primary schools were reopened everywhere (up to 13 years of age) while high school attendance is set at between 50% and 100%. Outdoor restaurants, cinemas and theatres and museums have already been allowed to reopen (for restaurants, both for lunch and dinner). There are no more limits for the number of people in restaurants outdoors. From 22 May, shopping centres were also opened on weekends and ski resorts were allowed to reopen (although the ski season is basically over). From 24 May, gyms were allowed to reopen. and from 1 June, indoor restaurants. From 15 June, theme parks and museums reopened, and from 1 July, indoor swimming pools, sport halls, trade exhibitions and congresses. However, the opening of clubs has been pushed back with no reopening date communicated as of yet. From 19 May, the curfew has been delayed from 10pm to 11pm (still until 5am). It was then delayed further from 12pm from 7 June and abolished altogether on 21 June. From 28 June, wearing masks outdoors is no longer required (it still is for indoor gatherings, though). Home visits to relatives and friends remain permitted once a day, up to a maximum of four people (in addition to the residents). The government also recently introduced a 'green pass' requirement to go into restaurants and bars (indoors), theatres, cinemas public transport and attend concerts and sporting events. As for international travel, people arriving from the EU no longer have to quarantine, but they will be required to show a negative COVID-19 test undertaken within 48 hours before departure (unless fully vaccinated). For the UK, the government introduced a special 5-day quarantine requirement and might introduce it for other countries. UK Having been in lockdown through the first quarter of the year, the UK economy has now largely reopened. The delayed final step for England, which saw government removing “all legal limits on social contact”, including opening nightclubs, removing social distancing requirements for hospitality and ending mandatory mask wearing, was taken on 19 July. As of 16 August, those who have received both doses of the vaccine and those who are under 18 no longer need to self-isolate after coming into contact with someone who has tested positive. However, it has also said that entry into nightclubs will require proof of vaccination from September. Meanwhile, Transport for London is maintaining an obligatory mask policy for its services. For the rest of the UK, plans for further lifting of restrictions vary by country. For Scotland, the ‘final’ easing of restrictions, akin to that already taken in England, took place on 9 August, but First Minister Nicola Sturgeon warned on 24 August that some restrictions might have to be re-imposed. In Wales, social distancing was lifted on 7 August, but working from home is still recommended and mask wearing is still mandatory. In Northern Ireland, a further stage of reopening took effect on 16 August, but limits and mask wearing will remain in place. International leisure travel has been allowed since 17 May with regulations on testing and quarantine requirements guided by a traffic light system with lighter restrictions for amber and green listed countries, depending on their levels of COVID-19 infection rates and variants present (UK government, 12 May 2021). Inbound arrivals will be subject to the same rules. On 28 July, the government announced that doubly vaccinated citizens of the US and the EU could enter the UK without quarantining from 2 August. Entry into the UK from a ‘red list’ of around 60 countries, including South Africa, Brazil and Turkey, remains banned to non-UK or Irish nationals. As of 15 February, for those who cannot be refused entry from these countries – i.e. returning British or Irish nationals – a mandatory 10-day quarantine in government-approved accommodation applies. Source: Country data, HSBC
6 Free to View ● Economics - Europe 25 August 2021
Signs of activity levels peaking
17. The eurozone PMIs eased slightly in August 18. There were some signs of easing supply- side bottlenecks
Index Eurozone: PMIs Index Index Eurozone: PMIs Index 70 70 60 60 60 60 50 50
50 50 40 40 40 40 30 30 30 30 20 20 20 20 10 10 10 10 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Manufacturing - Backlog Manufacturing PMI Services PMI Manufacturing - Delivery times Composite PMI Services - Outstanding business Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
19. Forward looking indicators have started to 20. The ifo survey has shown a sharp drop of come off a little from the recent highs expectations across all sectors
Index Eurozone PMIs Index Balance Germany : ifo ex pectations for the Balance 80 80 nex t 6 months 70 70 30 30 60 60 10 10 50 50 40 40 -10 -10 30 30 -30 -30 20 20 10 10 -50 -50 2019 2020 2021 Manuf. - new orders -70 -70 Manuf. - new export orders 2015 2016 2017 2018 2019 2020 2021 Services - new business Services Construction Services - business exp. Trade Manufacturing Source: Refinitiv Datastream, HSBC. Source: Macrobond, HSBC.
21. Supply shortages might be starting to exert 22. The GDP recovery in Germany so far has upward pressures on prices for car production been very uneven across sectors
Index Germany : Car industry ifo survey Index Index Germany : Value added by sectors Index 60 60 (Q4 19 = 100) (Q4 19 = 100) 40 40 120 120 20 20 110 110 100 100 0 0 90 90 -20 -20 80 80 -40 -40 70 70 -60 -60 2018 2019 2020 2021 2017 2018 2019 2020 2021 Trade, transport, hotels & restaurants Assessment of inventories Public services, education & health Expectations for selling prices (3mths) Manufacturing Selling prices Construction Source: Macrobond, HSBC Source: Macrobond, HSBC.
7 Free to View ● Economics - Europe 25 August 2021
Labour market continues to strengthen
23. The employment PMIs, though, are still 24. The French unemployment rate fell sharply looking solid in June, to 7.3%, the lowest since last May
Index Eurozone: Employment PMIs Index % France: Unemployment rate % 60 60 11 11 55 55 10 10 50 50 45 45 9 9 40 40 35 35 8 8 30 30 2015 2016 2017 2018 2019 2020 2021 7 7 Composite Manufacturing Services 2005 2008 2011 2014 2017 2020
Source: Refinitiv Datastream, BOE, HSBC. Source: Refinitiv Datastream, HSBC.
25. The number of short-time workers fell sharply 26. We estimate that there are still c5m short- in Italy in July, but remains elevated time workers across the eurozone
Mn hrs Italy: Short-time work schemes Mn hrs Mn Eurozone: Short-time workers Mn 800 800 35 35 700 700 30 30 600 600 25 25 500 500 20 20 400 400 15 15 300 300 200 200 10 10 100 100 5 5
0 0 0 0 Jul
Jul Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
Jan
Mar Mar
Nov
Sep
May May Germany France Italy Spain Other Industry Other Source: INPS, HSBC. Source: HSBC calculations based on national social security institutes and Labour Ministries.
27. Price pressures remain very high although 28. …and continue to push up producer prices, they are starting to fade a little... even though core industrial goods inflation has been less affected, at least so far
Index Eurozone: Input and output prices Index % Year Eurozone: PPI and non-energy goods % Year inflation 90 90 10 2 80 80 70 70 5 1
60 60 50 50 0 0 40 40 2012 2014 2016 2018 2020 -5 -1 2017 2018 2019 2020 2021 Manuf - Input prices Manuf - Output prices PPI (LHS) Non-energy goods infl. (RHS) Serv - Input prices Serv - output prices Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
8 Free to View ● Economics - Europe 25 August 2021
The return of tourism brings pockets of inflation
29. Air traffic has started to increase more 30. The pick-up is fairly evident relative to the meaningfully across Europe same period last year
000s Europe: Ev olution of daily flights 000s Mn Actual scheduled seats - weekly comparison Mn (7-day moving average) 4 4 40 40 35 35 3 3
30 30 Millions 25 25 2 2 20 20 15 15 1 1 10 10 5 5 0 0 0 0 Jan Feb Mar Apr May Jun Jul France Germany Spain UK 26/08/2019 24/08/2020 23/08/2021 2021 2020 2019 Source: Eurocontrol. HSBC Source: OAG
31. Some countries in particular have seen a 32. The number of overnight stays in Spain faster recovery, with Greece on top increased sharply in July
% Daily departure/arrival of flights (11/08/2021) % Mn Spain: Overnight hotel stays Mn 0 0 50 50 -10 -10 -20 -20 40 40 -30 -30 30 30 -40 -40 -50 -50 20 20
-60 -60 10 10
UK
Italy
Spain
Turkey
France Poland
Greece 0 0 Norway
Germany Jan Mar May Jul Sep Nov Netherlands % vs 2019 2019 2020 2021
Source: Eurocontrol, HSBC Source: Spanish Statistical Office, HSBC
33. The tourism and recreation sector has 34. ...which might start to generate some recovered sharply in the PMIs... pockets of inflationary pressures
Index Eurozone sector PMI: Tourism and recreation Index % y -o-y Eurozone: Package holidays, air fare % y -o-y 60 60 and accomodation inflation 10 10.0 50 50 5 5.0 40 40 30 30 0 0.0 20 20 -5 -5.0 10 10 -10 -10.0
0 0 -15 -15.0 Output New orders Employment Output prices Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 April May June July Package holidays Air fare Accomodation Source: Refinitiv Datastream, HSBC Source: Refinitiv Datastream, HSBC
9 Free to View ● Economics - Europe 25 August 2021
COVID-19 in Western Europe
35. In Germany, case numbers continue to 36. ...while in France the recent uptick has rise, though from relatively low levels… at least slowed 000s Germany : COVID-19 cases 000s 000s France: COVID-19 cases 000s 4000 32 7000 90
6000 75
3000 24 5000
Thousands Thousands Thousands 60 Thousands 4000 2000 16 45 3000 30 1000 8 2000 1000 15 0 0 0 0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
37. In Italy, infection rates have stabilised 38. Spanish numbers are falling sharply 000s Italy : COVID-19 cases 000s 000s Spain: COVID-19 cases 000s 5000 45 4000 100
4000 36
3000 75
Thousands Thousands
Thousands Thousands 3000 27 2000 50 2000 18 1000 25 1000 9
0 0 0 0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
39. Otherwise, in the UK cases are back on 40. … while in Switzerland they appear to an upward trajectory be past the peak 000s UK: COVID-19 cases 000s 000s Sw itzerland: COVID-19 cases 000s 7000 90 800 24
5600 72
600 18
Thousands Thousands
Thousands Thousands 4200 54 400 12
2800 36 200 6 1400 18
0 0 0 0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
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Free to View ● Economics - Europe 25 August 2021
41. Dutch cases have been broadly stable, 42. Case numbers in Norway were rising but they seem back on the rise in Belgium rapidly, but we might be nearing a peak 000s Netherlands/Belgium: COVID-19 cases 000s 000s Norw ay: COVID-19 cases 000s 2000 30 140 3.5 120 3.0 1600 24
100 2.5
Thousands Thousands Thousands 1200 18 Thousands 80 2.0 800 12 60 1.5
400 6 40 1.0 20 0.5 0 0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 0 0.0 NL - New Cases (RHS) BE - New Cases (RHS) Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 NL - Cumulative (LHS) BE - Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
43. Sweden has not really felt much of the 44. Irish cases are rising very gradually Delta variant so far 000s Sw eden: COVID-19 cases 000s 000s Ireland: COVID-19 cases 000s 1200 12 360 9.0 320 8.0
900 9 280 7.0
Thousands Thousands Thousands 240 6.0 Thousands 200 5.0 600 6 160 4.0 120 3.0 300 3 80 2.0 40 1.0 0 0 0 0.0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
45. Portugal has seen a steady drop in 46. …while in Greece cases have cases after a small spike in August… stabilised at a relatively high level
000s Portugal: COVID-19 cases 000s 000s Greece: COVID-19 cases 000s 1050 18 600 6 900 15 500 5
750
Thousands Thousands Thousands 12 Thousands 400 4 600 9 300 3 450 6 200 2 300 150 3 100 1 0 0 0 0 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS) Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
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Free to View ● Economics - Europe 25 August 2021
Fiscal measures (in the Big 4 eurozone countries and the UK)
47. Fiscal policy was highly supportive of growth last year even if a significant chunk of support did not make it into the economy due to restrictions and was actually saved
% GDP Decomposition of deficit changes in 2020 % GDP 14 14 12 12 10 10 8 8 6 6 4 4 2 2 0 0 -2 -2 Eurozone Germany France Italy Spain* UK*
Discretionary One-offs Economic cycle Fiscal impulse Deficit change Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: *Refers to fiscal year 2020/21. **Discounting the impact (0.9% of GDP) of the incorporation of ‘Sareb’ under the public sector. The ‘Economic Cycle’ component for eurozone countries and the Big 4 includes the ‘normal’ short-time work compensation schemes but not the extensions and more generous terms agreed in response to the COVID-19 crisis. For the UK, it includes the Job Retention Scheme (JRS).
48. After the latest significant upward revisions of this year’s deficit targets by most eurozone countries, fiscal policy could be even more supportive of growth this year
% GDP Decomposition of deficit changes in 2021 % GDP 5 5 4 4 3 3 2 2 1 1 0 0 -1 -1 -2 -2 -3 -3 -4 -4 -5 -5 Eurozone Germany France Italy Spain UK*
Discretionary Economic cycle NGEU 'grants' 2020 One-offs expiring Fiscal impulse Deficit change Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: *Refers to fiscal year 2020/21. The ‘Economic Cycle’ component for eurozone countries and the Big 4 includes the ‘normal’ short-time work compensation schemes but not the extensions and more generous terms agreed in response to the COVID-19 crisis. For the UK, it includes the Job Retention Scheme (JRS).
49. Fiscal policy should remain expansive in 2022 in the eurozone thanks to the Next Generation EU fund, while Brussels has said that EU fiscal rules will remain suspended % GDP Eurozone: fiscal deficit decomposition % GDP 10 10 8 8 6 6 Total stimulus Total stimulus 4 4 2 2 0 0 -2 -2 -4 -4 2020f 2021f 2022f Previous year Economic cycle One-offs (2020) Discretionary NGEU 'grants' Overall deficit
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: The adjusted series takes into account that due to ongoing restrictions at least part of the stimulus implemented last year and this year did not actually feed through into the economy but will only do so once restrictions are lifted.
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Disclosure appendix Analyst Certification The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s) whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific recommendation(s) or views contained in this research report: Fabio Balboni Important disclosures This document has been prepared and is being distributed by the Research Department of HSBC and is not for publication to other persons, whether through the press or by other means. 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