The contours of the European economic recovery are changing, from one led by a rebound in industrial activity to a more services-based pickup. A lower incidence of COVID-19 and the broad rollout of vaccines across Europe is enabling governments to lift most restrictions to economic activity, paving the way for a strong restart this summer. Purchasing managers’ surveys show the rotation in growth already started in May, following first month of the reopening (see chart 1). We now expect GDP to increase 4.4% this year and 4.5% in 2022, from 4.2% and 4.4% previously.

The key driver of the recovery is consumption now that households are not forced to save anymore. While survey data suggests that higher-income households, which have a lower propensity to spend, put more money aside, it also highlights that even lower-income households saved more than usual (see chart 2). Thanks to measures like short-time work schemes, eurozone…

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