ECB: Supply Bottlenecks Should Fully Unwind by 2023

13 January 2022

By David Barwick – FRANKFURT (Econostream) – Supply bottlenecks should fully unwind by 2023, the European Central Bank said on Thursday.

In its eighth and last economic bulletin of 2021, released Thursday, the ECB said that the global economy was continuing to recover, despite the near-term downside impact of supply constraints, more expensive raw materials and Omicron.

Survey data indicated a weak start to 4Q, especially in manufacturing, due to supply bottlenecks, the ECB said. ‘Supply bottlenecks are expected to start easing from the second quarter of 2022 and to fully unwind by 2023’, the bulletin said.

In the euro area, also continuing to recover, ‘[g]rowth is moderating, but activity is expected to pick up again strongly in the course of this year’, according to the ECB. ‘The continued economic recovery is foreseen to be driven by robust domestic demand.’

Job markets were on the mend, improving the outlook for consumption, which would also get a boost from pandemic savings, the ECB said.

‘Economic activity moderated over the final quarter of last year and this slower growth is likely to extend into the early part of this year’, the ECB said. ‘We now expect output to exceed its pre-pandemic level in the first quarter of 2022.’

The reinstatement of public health measures in response to the latest pandemic wave could slow the recovery, especially in the most exposed sectors, the bulletin said.

‘The pandemic is weighing on consumer and business confidence and the spread of new virus variants is creating extra uncertainty, the ECB said. ‘In addition, rising energy costs are a headwind for consumption.’

‘The future course of the pandemic remains the key risk affecting the baseline projections for the global economy’, the ECB said. ‘Other risks to the growth outlook are judged to be tilted to the downside, whereas the balance of risks to global inflation is more uncertain.’