After the summer, the euro area economy appeared to be on course to its old strength.

The gross domestic product (GDP) increased by 2.2 percent in the third quarter compared to the previous quarter, and the gap to the pre-crisis level narrowed to just 0.5 percent.

However, there could be a setback at the end of the year.

"The further recovery will be slowed down by an unpleasant combination of the rapid rise in energy prices, persistent material shortages and local waves of infections of varying strength," said KfW chief economist Fritzi Köhler-Geib.

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The fourth wave of the pandemic has recently shifted from Eastern Europe to the center of the continent.

In comparison, the vaccination quota is particularly low in Eastern Europe.

Slovakia brings up the rear in the euro area: only 48 percent of the population have been vaccinated against the coronavirus at least once, while the seven-day incidence of more than 1,400 is higher than anywhere else in Europe.

But the number of cases is also increasing in Germany, Austria, the Netherlands, Belgium and France, which in many places led to stricter corona measures.

Austria even imposed a lockdown again to break the wave of infections.

The wave has now spread to southern Europe, where vaccination rates are comparatively high and the infection rate has been manageable up to now.

However, this week the government of Portugal, which has the highest rate in the euro area at 89 percent, declared an emergency again due to the increasing number of infections.

Mobility is decreasing

This is making consumers more cautious: real-time data such as the movement data from mobile phones recorded by Google point to an increased decline in mobility in the euro area in November. People hold back, especially when it comes to shopping and leisure activities. Despite the slowdown, the activity is still higher than at any other time in summer 2020 and comparable to the end of May 2021, explained ING economist Bert Colijn. "But while the decline in mobility has been modest so far, it is adding headwinds to GDP growth," he said.

However, the damage is likely to be less than in the previous waves of infection, said Stefan Kooths, economic director at the Kiel Institute for the World Economy: "The economic pain of the pandemic is getting smaller from wave to wave." With the advanced recovery, however, the height of the fall is also increasing for the economy higher than the wave of infections a year ago.

“The economy has learned to adapt to the pandemic and the restrictions,” says Katharina Utermöhl, Allianz's European economist.

However, it will not be enough for more than “mini growth” in the fourth quarter.

“The economy in the euro area is likely to fall into hibernation with rather disappointing growth rates in the next few months,” she expects.

Sentiment high only for a short time

The high number of corona cases has so far not affected the corporate mood.

The purchasing managers' index of the London Markit Institute surprisingly rose by 1.2 points to 55.4 points in November and is thus above the 50 point mark, which signals growth.

Nonetheless, the business outlook has deteriorated more sharply than it has been in 10 months.

Service providers in particular are pessimistic about the future.

In addition, the uncertainties about increasing numbers of infections and the new Omikron variant are unlikely to be fully captured by the survey results.

The high sentiment will therefore be "only short-lived," said Markit chief economist Chris Williamson.

For Germany, the barometer remained almost unchanged at its eight-month low from October.

Because the largest economy in the euro area is particularly suffering from delivery bottlenecks due to its large industrial share.

According to a recent survey by the Munich-based Ifo Institute, the shortage of materials even increased again in November.

74.4 percent of industrial companies - 4 percentage points more than in October - complained of bottlenecks and problems in the procurement of primary products and raw materials.

Germany is no longer at the top

"The supply chain bottlenecks are proving to be much more sticky than expected," says Allianz economist Utermöhl. As a result, Germany has long since lost its nose in the catch-up process in the euro area: “While France and the euro area as a whole are expected to reach their pre-crisis level in this quarter, Germany, together with Italy, will not follow suit until spring and summer 2022 can."

Like most economists, she is anticipating overall growth of 5 percent in the euro area this year. This is also in line with the European Commission's autumn forecast. Germany, on the other hand, will probably only grow about half as fast. Most forecasts expect an increase of around 2.5 percent. However, it should not be forgotten that the economic slump in the euro area in 2020 was much deeper than in Germany. In the coming year, economic output in Germany and the euro area should then increase by around 4 percent.

The spread of the new virus variant Omikron carries risks, but the economy in the euro area and also in Germany is still on track to return to its original growth path next year, says Ulrich Kater, chief economist at Deka-Bank.

2022 will also be “a year of fiscal and monetary policy setting”.

It will show whether the states' economic stimulus programs and the extremely expansive monetary policy of the ECB have overstimulated demand and whether inflation will remain high for a long time.