Europe’s economy is likely to rally in the second quarter as an acceleration in COVID-19 vaccine rollout allows governments to gradually lift restrictions, the European Commission said in its interim winter forecast.

The currency bloc’s economy is expected to grow at a rate of 3.8 per cent this year, instead of 4.2 per cent projected in the autumn forecast. However, the outlook for 2022 was lifted to 3.8 per cent from three per cent, citing the start of mass vaccination campaigns. The eurozone economy contracted by 0.7 per cent quarter-on-quarter in the last three months of 2020 and economists expect it will shrink again in the first quarter of this year.

Meanwhile, US consumer prices increased firmly in December, underpinned by a surge in the cost of petrol, although underlying inflation remained tame as the economy battled with the COVID-19 pandemic, which has weighed on the labour market and the services industry. The Labour Department said on Wednesday that its consumer price index rose by 0.3 per cent in January after inching up by a revised 0.2 per cent in December.

Economists had expected consumer prices to go up by 0.3 per cent compared to the 0.4 per cent increase originally reported for the previous month. Petrol prices soared by 7.4 per cent in January after jumping by 5.2 per cent in December. Some economists believe inflation will breach the Federal Reserve’s inflation target of two per cent this year, citing nearly $900 billion additional pandemic relief approved by the government in late December.

Finally, in the UK, the housing market slowed at the start of the year, with new property listings, buyer enquiries and sales all falling in January, according to a survey. A survey by the Royal Institution of Chartered Surveyors (Rics) showed the market slowing markedly despite being allowed to stay open during the country’s third national coronavirus lockdown.

The monthly survey found that a net balance of -28 per cent of chartered surveyors reported a decline in new buyer enquiries in January, ending a seven-month run of rises and signalling a drop-off in demand. Many estate agents and surveyors said they expected the looming end to temporary stamp duty and land tax holidays across the UK to hit sales in months to come.

The article was prepared by Bank of Valletta plc for general information purposes only.