Euro area: Recovery continues, inflation keeps rising

The euro area expanded by 2.2% during the third quarter, getting the economy back into touching distance to its pre-pandemic level of activity. The country data show that France has now fully recovered , while Spain at the other end still has lots of catch-up to do. Inflation keeps rising with headline inflation at 4.1%yoy in October after 3.4%. Core inflation edged higher to 2.1% after 1.9%, showing that it is energy prices that are pushing inflation higher at this stage. We expect inflation to peak at 4.4% in November and then to start declining again, falling below 2% by the second half of 2022.