By David Barwick – FRANKFURT (EconoStream) – European Central Bank Executive Board member Yves Mersch on Monday said that the most recent information shows the economic recovery to be losing momentum on account of the resurgence of the pandemic.

In opening remarks at a behind-closed-doors event for private investors, Mersch, according to a text made available by the ECB, said heightened uncertainty was weighing on spending and investment.

The economic recovery is still ‘incomplete and prone to setbacks’, he said. After an initial rebound that was ‘slightly stronger than we expected’, he said, ‘[m]ore recently, incoming data have suggested that the recovery is losing some of its momentum’.

This is owing to the ‘renewed challenges for businesses’ of increased new Covid-19 cases, he said, noting that overall euro area services business activity had contracted on the month in September, even as manufacturing continued to grow and actually accelerated.

‘The environment of heightened uncertainty about economic prospects continues to weigh on household spending and business investment’, he said.

Mersch’ note of caution echoes that of ECB President Christine Lagarde, who yesterday said that the growing number of new Covid-19 cases and the public health measures taken in reaction ‘are adding to the uncertainty and weighing on the recovery’. Already ‘uneven, uncertain and incomplete’, the recovery now also ‘risks losing momentum’, she said.

Mersch noted that the ECB’s baseline scenario allowed for a degree of pandemic resurgence. In assessing all information, the Governing Council would ensure ‘that this incoming information, such as information on containment measures which is already included in our baseline, is only accounted for once in our assessment’, he said.

Because of the uncertainty about the impact of the pandemic, risks are predominantly to the downside, he said.

Prospects for inflation are subdued on account of economic slack, weak energy prices and the euro’s strength, he said.

Mersch’s prepared remarks included a reiteration of the ECB’s willingness to act: ‘The Governing Council continues to stand ready to adjust all of its instruments, as appropriate, to ensure that inflation moves towards its aim in a timely and sustained manner.’