Intrum : Economic outlook for 2022 – preparing your business

Anna Zabrodzka, Senior Economist at Intrum.

Over the last couple of years the pandemic has dictated how we live our lives and spend our money.

Lockdowns and travel restrictions mean we have all spent more time at home. The result has been higher average savings rates, reduced spending on services and increased spending on goods.

The economic impact of this behaviour on businesses varies across sectors and countries. For example, while the hospitality and leisure industries have been hit hard, telecom companies have benefitted from changes to working behaviour and demand for online conferences and meetings.

The big question for businesses is whether these changes are temporary or permanent. While some changes, like travelling, should return to normal, others, such as hybrid working patterns, could be here to stay. Those permanent changes will affect some industries more than others.

Macroeconomic impact of the pandemic

As well as big changes in consumer behaviour, the pandemic has had unprecedented macroeconomic effects, in particular the recent spike in inflation.

The sharp stop of economic activity last year caused by the lockdowns was followed with a period of rapid recovery that was even faster than most economists expected. This rebound has caused an imbalance between demand and supply, leaving suppliers struggling to catch up - with vast production backlogs and supply chain disruptions.

This has generated strong pressure on prices as well as a surge in demand for raw materials and energy.

Rocketing energy and production prices have been crippling for some industries. Others have been able to pass some of the costs onto consumers, which is why headline inflation in the euro area accelerated to almost 5% in November from just 0.9% in January. While some of the pricing pressures are temporary, there are worries that supply chain disruptions could prove to be more persistent.

A mixed picture across Europe

There are big variations in pricing pressures across Europe. Overall, in Central and Eastern Europe, prices have been increasing at a faster pace, however, due to tight labour markets, wages have been rising too, reducing the pain for consumers. This isn't the case everywhere: in Spain inflation topped 5% but wage growth has been lacklustre, causing protests across the country.