Economic data is already starting to surprise on the upside but markets are proving slow to accept this
The writer is chief market strategist for Europe, Middle East and Africa at JPMorgan Asset Management While the US economy showed extraordinary resilience last year, Europe has had a tougher time of it with growth stagnant, at best. But, I would argue, expectations for Europe are now far too low. This underperformance stems in large part from the ripple effects of Russia’s invasion of Ukraine and the ensuing energy crisis. Losing its main supplier of natural gas, Europe faced a colossal shock.
Quite simply, households accumulated too much “stuff” in the pandemic and turned their attention to spending on services as soon as reopening was complete. Europe’s manufacturing-heavy economies, like Germany, therefore suffered particularly acutely. As we look ahead, many of these former headwinds to European growth are quickly turning to tailwinds. Europe has done an extraordinary job of pivoting its energy supply from Russian pipeline gas to LNG.
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