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7 July 2021
Europe COVID-19 tracker Free to View
Economics - Europe
Delta wave spreads; UK presses ahead
The UK is preparing to lift most restrictions on 19 July…
…but concerns persist regarding the Delta variant, as Fabio Balboni
Senior Economist
vaccination rates among the elderly still lag on the continent HSBC Bank plc
The hard data are still lagging surveys, but improving labour
markets, confidence and tourism bode well for the recovery
UK re-opens, but Delta variant concerns persist on the continent
COVID-19 cases are on the rise across Europe, particularly in the Iberian Peninsula and the
UK, as the Delta variant continues to spread (charts 1-7). The Italian Health Minister expects
the Delta variant to account for 90% of cases before September. UK Health Secretary
Sajid Javid warned that new cases could top 100,000 a day in August (BBC, 6 July). Even
then, with more than 90% of those aged 70 and older fully vaccinated (as of 6 July), the UK
PM announced on 6 July that the country remains on track for the removal of most
remaining COVID-19-related restrictions on 19 July.
Otherwise, relatively lower vaccination rates among the elderly in countries such as Italy and
France (charts 23-24) seem to be stoking some of the worry about the Delta variant’s
spread. The Italian government is chasing more than 2m people over the age of 60 that still
have not had their first vaccine shot (Corriere della Sera, 2 July), while some unvaccinated
healthcare workers have been suspended. Germany is also considering making vaccination
mandatory for health workers.
Mind the gap, tourists return
The final June PMIs confirmed the strong flash reading, with an upward revision to the
eurozone services print and a particularly strong release in Spain (62.5). While the
manufacturing PMIs held up well, the hard data are struggling to follow, particularly in
Germany and France. In the former, industrial production (IP) took another dip in May
(-0.3% m-o-m) and remains some 5% below its pre-pandemic levels, with construction the
only bright spot. Industrial orders dropped 3.7% m-o-m in May, even though that might not
necessarily be bad news for firms given the work backlogs. France also saw another drop in
IP in May (-0.3% m-o-m), driven by the fourth consecutive large drop in car production
(-7.9% m-o-m). Ireland (+4.6% m-o-m) might save the day for the eurozone, though.
On the bright side, consumer confidence keeps rising as unemployment fears fade, and
retail sales bounced back in May (+4.4% m-o-m). The labour market remains supportive,
with June being exceptionally strong in Spain (chart 25). This bodes well for demand
recovery prospects, considering also the return of tourists. Italy’s Tourism Minister said the
sector was heading for a “sold out” summer (AGI, 1 July) and France is seeing more
reservations even relative to 2019, with domestic tourists compensating for fewer foreign
ones (La Tribune, 5 July). Countries more reliant on foreign tourists might face bigger
difficulties, as travel across Europe is still limited. Investor confidence remains high, with
inflation pressures seen as temporary. The European Commission revised up its eurozone
growth forecasts for 2021 to 4.8% and 2022 to 4.5%, from 4.3% and 4.4%, respectively, but
only nudged its 2022 inflation forecast up 0.1ppt, to 1.4%.
This is an abridged version of a report of the same title published on 7 July 2021. Please
contact your HSBC representative or email AskResearch@hsbc.com for more information.
Disclosures & Disclaimer Issuer of report: HSBC Bank plc
This report must be read with the disclosures and the analyst certifications in
the Disclosure appendix, and with the Disclaimer, which forms part of it. View HSBC Global Research at:
https://www.research.hsbc.comFree to View ● Economics - Europe
7 July 2021
First signs of the Delta variant effect detectable on the continent
1. New infection numbers in the UK are now back on the rise in Europe
COVID-19 cases* in the eurozone big 4 and UK
160000 160000
120000 120000
80000 80000
40000 40000
0 0
Jan Mar May Jul Sep Nov Jan Mar May Jul
Germany France Italy Spain UK
Source: Refinitiv Datastream, HSBC. Notes: *7-day moving average.
2. Most countries have reported a higher caseload this week than in the previous one
7dma Daily COVID-19 cases per 100k of population 7dma
50 50
40 40
30 30
20 20
10 10
0 0
Spain
Germany
Portugal
Italy
Sweden
Ireland
Greece
Netherlands
Belgium
Norway
UK
France
Switzerland
7-day to 29-June 7-day to 6-July
Source: Refinitiv Datastream, HSBC. Note: Weekend numbers are reported as 0, so “7-days to” does not include Saturday and Sunday.
3. ICU numbers have started to tick up in the 4. ...as the age of people testing positive to
UK but remain very low... COVID-19 has fallen dramatically
Total COVID-19 related ICU patients Total Median age England: Age of people testing Median age
8000 8000 positiv e for COVID-19
60 60
6000 6000 50 50
4000 4000 40 40
2000 2000 30 30
0 0 20 20
Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21
Germany France Italy UK* People tested People testing positive
Source: Macrobond, HSBC. *Medically ventilated Source: The Spectator, Wellcome Sanger Institute, HSBC
We acknowledge the assistance of Emily Wagenmann and Yash Dewan, HSBC Bank plc, in the
preparation of this report.
2Free to View ● Economics - Europe
7 July 2021
Can vaccination progress outrun the Delta variant?
5. Progress on vaccinations is fairly consistent across the continent, even though it is still
lagging the UK in most EU countries
Number Number of v accine doses administered per 100 people Number
160 160
120 120
80 80
40 40
0 0
Finland (4 Jul)
Greece (4 Jul)
France (30 Jun)
Italy (4 Jul)
Ireland (4 Jul)
Germany (4 Jul)
UK (3 Jul)
US (4 Jul)
Malta (3 Jul)
Poland (4 Jul)
Bulgaria (4 Jul)
Iceland (2 Jul)
Canada (4 Jul)
Spain (1 Jul)
Sweden (2 Jul)
Portugal (4 Jul)
Norway (1 Jul)
Source: Our World in Data, HSBC
6. The Delta variant is predominant in the 7. ...and is becoming more widespread on
UK... the continent
% Proportion of different COVID-19 v ariants % % COVID-19 sequences by the Delta v ariant of all cases %
in England
100 100 100 100
80 80 80 80
60 60
60 60
40 40
40 40
20 20
20 20
0 0
0 0
Spain
Germany
Italy
Potugal
UK
France
Sep-20 Nov-20 Jan-21 Mar-21 May-21
Alpha: B.1.1.7 (Kent) Delta: B.1.617.2 (India) Other
Source: The Spectator, Wellcome Sanger Institute, HSBC Source: Our World in Data, HSBC
8. The pace of vaccinations has started to 9. Most elderly people are now fully
ease in some countries vaccinated in the UK
Per mn Daily COVID-19 v accine doses Per mn % England: Percentage of population v accinated %
14000 14000 by age group
100 100
12000 12000
10000 10000 80 80
8000 8000 60 60
6000 6000
40 40
4000 4000
2000 2000 20 20
0 0 0 0
Dec-20 Feb-21 Apr-21 Jun-21 < 30 30-50 50-70 70+
Germany France Italy
Spain UK US First dose Fully vaccinated
Source: NHS Source: NHS, HSBC
3Free to View ● Economics - Europe
7 July 2021
10. In Italy, less than half of the people in 11. ...and also in France, there is still a way
the 50-70 age bracket are vaccinated... to go to give the elderly full protection
% Italy : Percentage of population v accinated % % France: Percentage of population vaccinated %
by age group by age group
100 100 100 100
80 80 80 80
60 60 60 60
40 40 40 40
20 20 20 20
0 0 0 0
< 30 30-50 50-70 70+ < 30 30-50 50-70 70+
Single dose Fully vaccinated Single dose Fully vaccinated
Source: Italian Government, HSBC Source: French Ministry of Health, HSBC
12. The slowdown in vaccination rates does not seem to be related to vaccine supply issues
________________________________________________ EC _________________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University Up to 400m Adenovirus 70.4%
BioNTech/Pfizer Up to 604m + 1.8bn** mRNA 95%
CureVac Up to 405m mRNA TBD
GSK/Sanofi Up to 300m Protein adjuvant TBD
Janssen/JNJ Up to 400m Adenovirus 66%
Moderna Up to 460m mRNA 95.6%
_____________________________________________ Germany ______________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University 56m Adenovirus 70.4%
BioNTech/Pfizer 30m + 64m from EC = 94m mRNA 95%
CureVac 20m + 54m from EC mRNA -
GSK/Sanofi 55m Protein adjuvant TBD
Janssen/JNJ 37m Adenovirus 66%
Moderna 50m mRNA 95.6%
______________________________________________ France _______________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University Up to 60m from EC Adenovirus 70.4%
BioNTech/Pfizer Up to 91m from EC mRNA 95%
Moderna Up to 69m from EC mRNA 95.6%
CureVac Up to 45m from EC mRNA TBD
GSK/Sanofi Up to 24m from EC Protein adjuvant TBD
Janssen/JNJ Up to 35m from EC Adenovirus 66%
_______________________________________________ Italy ________________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University 16m from EC Adenovirus 70.4%
BioNTech/Pfizer 40.5m from EC mRNA 95%
Various providers 70m - -
_______________________________________________Spain ________________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University 31.5m from EC Adenovirus 70.4%
BioNTech/Pfizer 20m + 94m** from EC mRNA 95%
Janssen/JNJ 20m Adenovirus 66%
________________________________________________ UK _________________________________________________
Organisation Dose Type of vaccine Reported effectiveness*
AstraZeneca/Oxford University 100m Adenovirus 70.4%
BioNTech/Pfizer 100m mRNA 95%
GSK/Sanofi 60m Protein adjuvant TBD
Janssen/JNJ 30m Adenovirus 66%
Moderna 17m mRNA 95.6%
Novavax 60m Protein adjuvant 89%
Valneva 60m Inactivated whole virus TBD
Source: AstraZeneca, BioNTech, CureVac, GSK, Janssen, Moderna, Novavax, IDT Biologika, Valneva, HSBC. Note: *Maximum reported. **Between end-2021 and 2023
4Free to View ● Economics - Europe
7 July 2021
Recovery in activity taking a breather
13. After the sharp recovery in mobility when the bulk of restrictions were lifted between
April and May, activity rates have been moving sideways more recently…
% from baseline Europe and US: mobility data - retail and recreation* % from baseline
20 20
0 0
-20 -20
-40 -40
-60 -60
-80 -80
-100 -100
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21
Germany France Italy Spain
UK Sweden Norway US
Source: Google, HSBC. Note: *7-day moving average
14. …while remote working still seems to be keeping workers at home
% from baseline Europe and US: mobility data - workplaces* % from baseline
20 20
0 0
-20 -20
-40 -40
-60 -60
-80 -80
Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21
Germany France Italy Spain
UK Sweden Norway US
Source: Google, HSBC. Note: *7-day moving average
15. Activity levels have plateaued in the 16. In the UK, the post lockdown activity
eurozone also, as some restrictions remain boom abated somewhat in recent weeks
Index Eurozone: stringency of restrictions Dev iation Index UK: stringency of restrictions Dev iation
and mobility * from baseline and mobility * from baseline
0 40 0 20
20 20 20 0
40 0 40 -20
60 -20 60 -40
80 -40 80 -60
100 -60 100 -80
Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21
Stringency score (LHS, inverted) Mobility (RHS) Stringency score (LHS, inverted) Mobility (RHS)
Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC. Source: Google mobility, Oxford COVID-19 Government response Tracker, HSBC
Note: *Mobility data is an average of all the components, excluding residential, 7dma Note: *Mobility data is an average of all the components, excluding residential, 7dma
5Free to View ● Economics - Europe
7 July 2021
Gearing up for a relatively restriction-free summer
17. Latest on the restrictions from the major European countries
Country Latest lockdown measures
Germany The so-called national emergency break expired on 30 June, so that each federal state is now responsible for its own COVID-
19 restrictions, as long as the number of new infections within seven days per 100 citizens remains below 100. Above this
incidence level, the following rules would still apply, which were agreed by the Chancellery and the heads of federal states on
22 March:
Private meetings are limited to five persons (children up to 14 years are not counted) from two different
households in public and private places.
When using public transport or visiting shops, masks of the “KN95 of FFP” standards must be worn. An even
stricter rule applies for employees and visitors of nursing homes, who have to wear FFP-2 masks for at least as
long as there is not sufficient protection through vaccination.
Non-essential private domestic travel should be generally avoided (but is not prohibited). Travellers from abroad
who enter Germany from a designated COVID-19 risk area need to register before entering and have to
quarantine for at least 10 days or provide a negative test result after five days at the earliest.
Entering Germany from a high-risk designated area additionally requires a negative test result.
As of 7 July, none of the 401 districts in Germany was above the critical incidence threshold of 100 and indeed none
was even above 35. As a consequence, most restrictions are now either eased (e.g. with respect to mask wearing in
specific areas) or completely abandoned (like travel restrictions and private meetings in public) but the specific rules
differ across regions and federal states. Moreover, on 4 May, the Bundestag passed a decree that basically exempts
fully vaccinated people and recovered COVID-19 patients from almost all restriction measures, such as providing an
obligatory test to use certain services, and the general contact restrictions were lifted for them as well.
France The government introduced strict additional restrictions at the start of the year, including a stricter curfew and travel
restrictions. On 20 March, full-time local lockdowns were put in place in 19 departments (covering all the Paris region). The
restriction measures in confined departments include the closure of non-essential shops and services, limitations of travel to
within 10km from homes and a ban on interregional travel. On 31 March, President Macron announced an extension of
these rules to all metropolitan France from 3 April in the evening. In addition, schools were closed for between three
and four weeks, including the already planned two-week-long spring holidays.
Restrictions have started to be gradually eased since the end of April. Kindergartens and primary schools re-opened on
26 April, followed by secondary and high schools on 3 May. All restrictions on domestic travel were also lifted on 3 May.
On 19 May, non-essential shops, cultural places (museums, cinemas) and the outdoor part of bars and restaurants
partially re-opened, but with restrictions on capacity. Moreover, the start of the curfew was set at 9pm instead of 7pm.
On 9 June, gyms and the indoor parts of bars and restaurants re-opened (at 50% of capacity). The capacity limit for
the outdoor part of bars and restaurants was lifted, while the one on cinemas and theatres was raised to 65%. The
start of the curfew was delayed to 11pm instead of 9pm. Rules on remote working were eased. Finally, attendance at
some events of more than 1000 people (festivals, shows) was authorised with a COVID-19 health pass.
Travel rules were also eased on 9 June: all fully vaccinated people from EU and from some other ‘green’ countries
are no longer required to show a negative virus test to enter France, with only a proof of their vaccination status
being sufficient.
The curfew was completely lifted on 20 June and masks outdoors are no longer mandatory effective 17 June.
On 30 June, most existing capacity limits (shops, restaurants, gyms, cultural venues) were lifted. The only exception
is for indoor concerts and festivals, where a capacity limit of 75% is maintained. Nightclubs will re-open on 9 July, but
with strict protocols (capacity limit of 75% indoors and a required COVID-19 health pass).
Italy Currently, all the Italian territory is in the ‘white’ category with hardly any restrictions (other than obligatory mask
wearing indoors – since 28 June, masks are no longer required outdoors – and some social distancing requirements).
In the COVID-19 decree approved on 18 May, the government laid out a timeline for lifting restrictions at the national
level for the ‘yellow’ regions (these do not apply to ‘white’ regions). Primary schools were re-opened everywhere (up
to 13 years of age) while high school attendance is set at between 50% and 100%. Outdoor restaurants, cinemas and
theatres and museums have already been allowed to re-open (in the case of restaurants, both for lunch and dinner).
There are no more limits for the number of people in restaurants outdoors. From 22 May, shopping centres were also
opened on weekends and ski resorts were allowed to re-open (although the ski season is basically over). From 24
May. gyms were allowed to re-open. and from 1 June, indoor restaurants. From 15 June, it will be the time of theme
parks and museums, and from 1 July, indoor swimming pools, sport halls, trade exhibitions and congresses. Clubs
will be allowed to re-open from 10 July. Home visits to relatives and friends remain permitted once a day, up to a
maximum of four people (in addition to the residents). From 19 May, the curfew has been delayed from 10pm to 11pm
(still until 5am). It will then be delayed further from 12pm from 7 June and will be abolished altogether on 21 June.
From 28 June, wearing masks outdoors will no longer be required (it still is indoors, though). As for international
travel, until 31 July, people arriving from the EU, the UK and Israel no longer have to quarantine, but they will be
required to show a negative COVID-19 test undertaken within 48 hours before departure.
Source: Country data, HSBC
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7 July 2021
17. Latest on the restrictions from the major European countries (cont’d)
Country Latest lockdown measures
Spain On 9 May, the state of emergency expired and was not extended by the government. With that, the nationwide curfew
also came to an end. The freedom to travel across regions has been re-established with no regions maintaining the
external border closure in place (even though regions are still imposing travel restrictions in and out from specific areas
within the regions). On Saturday 26 June, Spain also eased its face mask rules, making masks no longer necessary in
outdoor settings where social distancing is observed. Some restrictions, though, remain in place at the regional level. Most
regions impose limitations in terms of the maximum number of people allowed for gatherings and the opening times for
restaurants and bars. Restrictions have recently been tightened in light of rising COVID-19 cases. For example, Aragon
brought forward the closing time of clubs to 12:30am and Navarra to 1am. Catalonia took a significant step back relative to
previous provisions and has now announced that only outdoors club can be open and not indoor ones, and only until 3am.
Spain’s external frontier remains open. For entry, a proof of vaccination or a negative COVID-19 test is required. Even
then, the UK maintaining Spain in the ‘amber’ list of countries requiring quarantine upon re-entry could be a setback for
the ability of Spain to attract foreign tourists.
UK Having been in lockdown through the first quarter of the year, the UK economy has been re-opening in recent months. In
England, schools re-opened on 8 March, rules on outdoor gatherings were relaxed on 29 March, hairdressers and outdoor
hospitality re-opened on 12 April, and indoor hospitality restarted on 17 May.
The next step for England, which would see the government removing “all legal limits on social contact”, including opening
nightclubs, removing social distancing requirements for hospitality and ending mandatory mask wearing, was initially
planned for 21 June, but delayed for four weeks. On 5 July, Prime Minister Boris Johnson confirmed plans to move
ahead with this stage of re-opening in England on 19 July.
For the rest of the UK, plans for further lifting of restrictions vary by country. For most of Scotland, hairdressers and
some retailers re-opened on 5 April and outdoor hospitality and gyms on 26 April with an indoor alcohol ban lifted and
cinemas re-opened on 17 May. In Scotland, it is hoped that all regions will move to ‘Level 0’ rules on 19 July, upping
limits on social gatherings. But the ‘final’ easing of restrictions, akin to that set for this month in England, is targeted
for 9 August. In Wales, the next stage of re-opening has been delayed from 21 June, with First Minister Mark
Drakeford announcing that further guidance is expected next week. In Northern Ireland, remaining regulations will be
reviewed on 8 July.
International leisure travel has not been banned since 17 May with regulations on testing and quarantine
requirements guided by a traffic light system with lighter restrictions for amber and green listed countries, depending
on their levels of COVID-19 infection rates and variants present (UK government, 12 May 2021). Inbound arrivals will
be subject to the same rules. However, Portugal was the only EU country on the green list originally, and it has now
been downgraded to amber. The next review will take place by 28 June. Importantly though, the government has
announced that it is working with the travel industry to enable fully vaccinated travellers from amber list countries to
vaccinate without needing to quarantine.
Entry into the UK from a ‘red list’ of 50 countries, including South Africa, Brazil and India, remains banned to non-UK
or Irish nationals. As of 15 February, for those who cannot be refused entry from these countries – i.e., returning
British or Irish nationals – a mandatory 10-day quarantine in government-approved accommodation applies.
Finally, it was also announced this week that fully vaccinated people who come into contact with people testing
positive for COVID-19 will not need to isolate from 16 August.
Source: Country data, HSBC
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7 July 2021
Widening disconnect between soft and hard data
18. The manufacturing PMIs remained 19. ...but production continued to disappoint in
surprisingly strong in July... Germany in May...
Index Manufacturing PMI - headline Index Index German: Industrial production Index
70 70 (Feb-20 = 100) (Feb-20 = 100)
105 105
60 60 100 100
95 95
50 50 90 90
85 85
80 80
40 40
75 75
70 70
30 30 Jan-20 May-20 Sep-20 Jan-21 May-21
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Capital goods (ex manuf. of motor vehicles)
Germany France Italy Spain Industrial production
Source: Refinitiv Datastream, HSBC Source: Macrobond, HSBC
20. ...while industrial orders took an even bigger 21. The manufacturing recovery also seems to
dip even if following a surge in previous months have come to a halt in France, dragged by cars
% m-o-m German: Industrial orders % y -o-y Index France: Industrial production Index
40 100 (Feb-20=100) (Feb-20=100)
110 110
30 80
100 100
20 60
10 40 90 90
0 20 80 80
-10 0 70 70
-20 -20
60 60
-30 -40 Feb-20 May-20 Aug-20 Nov-20 Feb-21 May-21
2015 2017 2019 2021 IP IP ex autos
m-o-m (LHS) y-o-y (RHS)
Source: Macrobond, HSBC Source: Refinitiv Datastream, HSBC
22. The services PMIs soared in June as more 23. Forward-looking indicators are still pointing
restrictions were lifted, and particularly in Spain upwards particularly for services
Index Serv ices PMI - headline Index Index Eurozone PMIs Index
70 70 80 80
60 60 70 70
60 60
50 50
50 50
40 40 40 40
30 30 30 30
20 20 20 20
10 10
10 10 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
0 0 Manufacturing- New export orders
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Services - Business expectations
Manufacturing - New orders
Germany France Italy Spain Services - New business
Source: Refinitiv Datastream, HSBC Source: Refinitiv Datastream, HSBC
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7 July 2021
Consumer confidence and labour market still supportive
24. The employment component of the PMIs is 25. June was a really good month for the labour
looking better and better across the eurozone market in Spain
Index Composite PMI - employment Index % vs Feb '20 Spain: Registered workers % vs Feb '20
60 60 0 0
50 50 -5 -5
-10 -10
40 40
-15 -15
30 30
-20 -20
20 20
-25 -25
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Feb-20 Jun-20 Oct-20 Feb-21 Jun-21
Germany France Italy Spain Overall Excluding ERTEs*
Source: Refinitiv Datastream, HSBC Source: HSBC calculations based on Spain Ministry of Labour. Notes: * Short-time work.
26. Consumer confidence keeps improving in 27. ...as unemployment fears keep falling, most
the eurozone, outside Spain... notably in Spain given the healthy labour market
Index Consumer confidence Index Index Unemployment ex pectations over Index
5 5 nex t 12 months
80 80
0 0
-5 -5 60 60
-10 -10 40 40
-15 -15
20 20
-20 -20
-25 -25 0 0
-30 -30
-20 -20
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Eurozone Germany Euro zone Germany France
France Italy
Spain Spain Italy
Source: Refinitiv Datastream, HSBC Source: Refinitiv Datastream, HSBC
28. Retail sales have seen hefty gains in most 29. Some tourists have started to come back to
countries in May Spain in May and June should have been better
Index (Jan-20 = 100) Retail sales Index (Jan-20 = 100) EURbn Spain: Spending by foreign tourists EURbn
120 120 100 100
110 110 80 80
100 100
60 60
90 90
80 80 40 40
70 70 20 20
60 60
0 0
Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21
Aug
Sep
Apr
May
Jan
Feb
Mar
Nov
Dec
Jun
Oct
Jul
Eurozone Germany France
Italy Spain UK 2019 2020 2021
Source: Refinitiv Datastream, HSBC Source: INE, Egatur, HSBC
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7 July 2021
Investor confidence remains high despite inflation concerns
30. The current conditions component of the 31. The eurozone Sentix index of investor
ZEW had another record-high rise in July confidence is now well above pre-crisis levels
Index Germany : ZEW survey Index Index Eurozone: Sentix investor confidence Index
100 100 45 45
75 75
30 30
50 50
25 25 15 15
0 0
0 0
-25 -25
-50 -50 -15 -15
-75 -75
-30 -30
-100 -100
2011 2013 2015 2017 2019 2021 -45 -45
Expectations Current conditions 2011 2013 2015 2017 2019 2021
Source: Bloomberg, HSBC Source: Bloomberg, HSBC
32. The oil price keeps rising which should add 33. The latest PMIs point to fast rising output
near-term pressures to inflation prices as well as input prices
EUR/litre Eurozone: Petrol pump prices EUR/bbl Index Eurozone: PMIs Index
and Brent crude 90 90
1600 70
80 80
1500 60
70 70
1400 50
60 60
1300 40
50 50
1200 30
40 40
1100 20
30 30
1000 10 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21 Manuf - Input prices Manuf - Output prices
Petrol pump prices (LHS) Brent crude (RHS) Serv - Input prices Serv - Output prices
Source: European Commission, Refinitiv Datastream, HSBC Source: Refinitiv Datastream, HSBC
34. Investors are still relatively unfazed by the 35. ...which together with rising cases has
medium-term inflation risks... helped keep government bond yields down
Index ZEW inflation ex pectations Index % Big 4: 10y r bond y ields %
100 100 3 3
75 75
50 50 2 2
25 25
1 1
0 0
-25 -25 0 0
-50 -50
-75 -75 -1 -1
2000 2005 2010 2015 2020 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Jul-21
Eurozone Germany US Germany France Italy Spain
Source: Macrobond, ECB Source: Bloomberg, HSBC
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7 July 2021
COVID-19 in Western Europe
36. Germany now has the lowest new 37. ...while in France, a small uptick is
infection number in Europe… already visible
000s Germany : COVID-19 cases 000s 000s France: COVID-19 cases 000s
4000 32 6000 90
Thousands
Thousands
Thousands
Thousands
5000 75
3000 24
4000 60
2000 16 3000 45
2000 30
1000 8
1000 15
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Jan-20 May-20 Sep-20 Jan-21 May-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
38. In Italy, new cases remain low even 39. ...while in Spain, new COVID-19 cases
though the Delta variant is spreading… have jumped markedly
000s Italy : COVID-19 cases 000s 000s Spain: COVID-19 cases 000s
5000 45 4000 100
Thousands
Thousands
Thousands
Thousands
4000 36
3000 75
3000 27
2000 50
2000 18
1000 25
1000 9
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Jan-20 May-20 Sep-20 Jan-21 May-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
40. In the UK the increase in case numbers 41. For Switzerland, COVID-19 is not a
is exponential again major issue at the moment
000s UK: COVID-19 cases 000s 000s Sw itzerland: COVID-19 cases 000s
5000 90 800 24
Thousands
Thousands
Thousands
4000 72
600 18
3000 54
400 12
2000 36
200 6
1000 18
0 0 0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 Jan-20 May-20 Sep-20 Jan-21 May-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
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7 July 2021
42. Cases in Belgium and the Netherlands 43. ...while cases are still low in Norway
are starting to creep up again...
000s Netherlands/Belgium: COVID-19 cases 000s 000s Norw ay: COVID-19 cases 000s
2000 30 140 3.5
Thousands
Thousands
Thousands
Thousands
120 3.0
1600 24
100 2.5
1200 18
80 2.0
800 12 60 1.5
400 6 40 1.0
20 0.5
0 0
Jan-20 May-20 Sep-20 Jan-21 May-21 0 0.0
NL - New Cases (RHS) BE - New Cases (RHS) Jan-20 May-20 Sep-20 Jan-21 May-21
NL - Cumula tive (LHS) BE - Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
44. In Sweden there is no clear indication of 45. Ireland has a constant and comparably
an uptick in case numbers low rate of new infections
000s Sw eden: COVID-19 cases 000s 000s Ireland: COVID-19 cases 000s
1200 12 300 9.0
Thousands
Thousands
Thousands
Thousands
250 7.5
900 9
200 6.0
600 6 150 4.5
100 3.0
300 3
50 1.5
0 0 0 0.0
Jan-20 May-20 Sep-20 Jan-21 May-21 Jan-20 May-20 Sep-20 Jan-21 May-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
46. Portugal meanwhile has seen the new 47. ...and more recently cases have
caseload increase recently... started to creep up in Greece as well
000s Portugal: COVID-19 cases 000s 000s Greece: COVID-19 cases 000s
900 18 450 5.0
Thousands
Thousands
Thousands
Thousands
750 15 360 4.0
600 12
270 3.0
450 9
180 2.0
300 6
150 3 90 1.0
0 0 0 0.0
Jan-20 May-20 Sep-20 Jan-21 May-21 Jan-20 May-20 Sep-20 Jan-21 May-21
New Cases (RHS) Cumulative (LHS) New Cases (RHS) Cumulative (LHS)
Source: Refinitiv Datastream, HSBC. Source: Refinitiv Datastream, HSBC.
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7 July 2021
Fiscal measures (in the Big 4 eurozone countries and the UK)
48. Fiscal policy was highly supportive of growth last year even if a significant chunk of
support did not make it into the economy due to restrictions and was actually saved
% GDP Decomposition of deficit changes in 2020 % GDP
14 14
12 12
10 10
8 8
6 6
4 4
2 2
0 0
-2 -2
Eurozone Germany France Italy Spain* UK*
Discretionary One-offs Economic cycle Fiscal impulse Deficit change
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: * Refers to fiscal year 2020/21.
**Discounting the impact (0.9% of GDP) of the incorporation of ‘Sareb’ under the public sector. The ‘Economic Cycle’ component for eurozone countries and the Big 4 includes
the ‘normal’ short-time work compensation schemes but not the extensions and more generous terms agreed in response to the COVID-19 crisis. For the UK, it includes the
Job Retention Scheme (JRS).
49. After the latest significant upward revisions of this year’s deficit targets by most
eurozone countries, fiscal policy could be even more supportive of growth this year
% GDP Decomposition of deficit changes in 2021 % GDP
5 5
4 4
3 3
2 2
1 1
0 0
-1 -1
-2 -2
-3 -3
-4 -4
-5 -5
Eurozone Germany France Italy Spain UK*
Discretionary Economic cycle NGEU 'grants' 2020 One-offs expiring Fiscal impulse Deficit change
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Notes: * Refers to fiscal year 2020/21.
The ‘Economic Cycle’ component for eurozone countries and the Big 4 includes the ‘normal’ short-time work compensation schemes but not the extensions and more generous
terms agreed in response to the COVID-19 crisis. For the UK, it includes the Job Retention Scheme (JRS).
50. Fiscal policy should remain expansive in 2022 in the eurozone thanks to the Next
Generation EU fund, while Brussels has said that EU fiscal rules will remain suspended
% GDP Eurozone: fiscal deficit decomposition % GDP
10 10
8 8
6 Total stimulus 6
Total stimulus
4 4
2 2
0 0
-2 -2
-4 -4
2020f 2021f 2022f
Previous year Economic cycle One-offs (2020) Discretionary NGEU 'grants' Overall deficit
Source: HSBC calculations based on national statistical institutes, Eurostat and European Commission, 2020 budgets and amendments. Note: The adjusted series takes into
account that due to ongoing restrictions at least part of the stimulus implemented last year and this year did not actually feed through into the economy but will only do so once
restrictions are lifted.
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7 July 2021
Disclosure appendix
Analyst Certification
The following analyst(s), economist(s), or strategist(s) who is(are) primarily responsible for this report, including any analyst(s)
whose name(s) appear(s) as author of an individual section or sections of the report and any analyst(s) named as the covering
analyst(s) of a subsidiary company in a sum-of-the-parts valuation certifies(y) that the opinion(s) on the subject security(ies) or
issuer(s), any views or forecasts expressed in the section(s) of which such individual(s) is(are) named as author(s), and any other
views or forecasts expressed herein, including any views expressed on the back page of the research report, accurately reflect
their personal view(s) and that no part of their compensation was, is or will be directly or indirectly related to the specific
recommendation(s) or views contained in this research report: Fabio Balboni
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