Can you imagine living in the current context without having information about the evolution of the economy? I am referring to objective and reliable data, such as employment, production, wages and prices. Most likely, the confusion would be huge. In the current circumstances, everyone’s perception of the economic situation is very different, and can be greatly influenced by the sector in which they work or the region in which they live. Fortunately, we have data with which everyone can contrast their impression of economic reality.
Thus, we can say that the growth rate of activity slowed down during the first quarter of the year, but with important nuances when we assess the situation in each country. The US is where the slowdown has been most abrupt. GDP fell by 0.4% quarter-on-quarter, but it is worth noting that the main drivers of growth, such as consumption and investment, continued to grow at a good pace. In the euro area, economic activity data maintained a modest pace of growth, in line with expectations, with growth of 0.2%, and there were no major differences between the major countries in the region.
Despite the resistance that economic activity has shown to date, and despite the good figures that the labor market is also offering, the economic outlook has worsened. This is largely due to the sharp rise in inflation, which is also leading to a significant turnaround in interest rate expectations. All indications are that the Fed, in an attempt to curb economic activity and, indirectly, inflation, will raise interest rates by about 2% this year, the sharpest rate of rise since 1995. ‘euro, the ECB is also expected to raise rates, but given lower inflationary pressures, it will do so at a more gradual pace, with an increase in the reference rate between 0.50 and 0.75 percentage points.
But beyond rising inflation and funding costs, and despite the marked deterioration in the outlook, the growth rate expected for 2022 and 2023 is relatively high. The impetus for activity that will lead to the end of restrictions on mobility and activity will be very significant if there are no new mutations in the virus. Thus, this year the US economy could grow by over 3%; the European could do so around 2.6%, and the Spanish, above 4%.
Certainly, the risks surrounding this scenario are remarkable, especially the bearish ones. One of the most worrying is a tightening of energy prices due to escalating sanctions and counter-sanctions between Russia and European countries. We will also need to follow closely the implications of the new wave of contagion and confinement in China, which could collapse global supply chains again and increase supply problems in various sectors. But things could also turn out better than expected, although for now it seems impossible. For futurology there is no data, but we must try to contemplate all the plausible scenarios and, in the same way that we must not fall into complacency when things are going well, we must not be pessimistic when we go through moments. difficult.