Service sector recovery after the coronavirus shock – Euro area outshines US for once
|Key points
The serv ice sector is the backbone of the US and euro area economies accounting for 80% and 74% of their GDP (see here) and hence its recovery is critical for the economic outlook.
The recovery in the US serv ice sector has stalled lately amid resurgent v irus cases in the populous southern and western states (which account for two-thirds of the US economy). Many of these states are now implementing or contemplating new lockdown measures.
Despite a much bigger initial hit amid earlier and more forceful lockdown measures, European serv ice sectors are now catching up to or even overtaking the US recovery, as the virus situation is better under control and the fear factor less prevalent, allowing for more widespread economic re-opening.
The resurgent v irus problems in the US present a material risk to the US recovery in the coming months (risk of a double dip). In contrast we think the euro area service sector recovery will continue barring any second virus waves during the European holiday season.
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