EU set to forecast lower growth and higher inflation, as economic outlook darkens – business live

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Europe’s economic outlook is deteriorating, as the Russia-Ukraine war continues to drive up oil and gas prices, hinder supply chains, and threatens full-scale disruption to energy supplies.

That’s expected to be the message from the European Commission, when it releases its latest economic projections this morning.

Those summer forecasts are due at 10am UK time, but Bloomberg has already seen a draft version. It show the euro area’s rebound from the pandemic will be weaker than anticipated, and that inflation will be even higher than feared, they say.

The Commission now expects eurozone inflation to jump to 7.6% in 2022, on average, sharply higher than its May estimate of 6.1% for the year, due to the surge in energy prices.

It also expects inflation to run around 4% next year — still double the official targets — up from May’s forecast of 2.7%.

The growth outlook has weakened too as rising prices hit demand, while fears of winter energy shortages hit confidence.

Eurozone GDP is now seen rising by 2.6% this year and 1.4% in 2023, Bloomberg reports, down from May predictions for gains of 2.7% and 2.3%.

The forecasts could still change before they’re officially published. But, Valdis Dombrovskis, executive vice president at the European Commission, has already warned that there will be some downward revisions, telling reporters on Monday that:

“What we see [is that] economic growth is proving quite resilient this year, still one can expect some downwards revision and even more so for the next year because of many uncertainties and risks.

“Unfortunately, inflation continues to surprise on the upside, so it’s once again going to be revised upwards.”

Europe fears that Russia doesn’t turn the Nord Stream 1 gas pipeline back on later this month, when its current maintenance is completed. That could lead to rocketing bills, energy rationing and economic turmoil this winter.

Recession fears helped to drive the euro below parity with the US dollar yesterday, for the first time since 2002.

The euro has risen back over $1, just. European stock markets are set to open higher after taking a jolt yesterday when US inflation hit a new 40-year high of 9.1%.

We also get the latest real-time data on the UK economy today, plus weekly US jobless figures and data showing how rapidly America’s factories are raising their prices.

The agenda

• 9.30am BST: Bank of England credit conditions survey
• 9.30am BST: ONS’s latest real-time indicators of economic activity and social change
• 10am BST: European Commission to publish latest economic forecasts
• 1.30pm BST: US weekly jobless figures
• 1.30pm BST: US PPI measure of producer price inflation