The Omicron surge may impact Euro Area’s economic growth in Q1, but it is unlikely to derail it.

Amid the fast spread of the Omicron variant, activity in services took a strong hit in December in Europe. On the other hand, the manufacturing sector remained more resilient. Particularly in Germany, most recent high-frequency data point to some revival of the automotive industry. Despite the recent resurgence in COVID-19 cases, mobility in Europe remained much higher compared to a year ago and closer to its pre-pandemic levels, suggesting the economic impact of Omicron be muted. Thus, we stay firm to our above-trend GDP growth rate of 3.9 percent for the Euro Area in 2022.