EU Hikes Recovery Forecast As Downside Risks Emerge

• The European Commission upgraded its euro zone growth forecasts on Wednesday, shrugging off growing worries about new COVID-19 variants and the impact of supply bottlenecks on factory production in Germany, the region's top economy. 
• German industrial output fell in May, data showed, while the country's main auto association downgraded its 2021 car sales forecast. Persistent global semiconductor shortages were cited as a factor in both. 
• The European Union's executive Commission nonetheless predicted the euro zone will grow by 4.8% this year, after the reopening of economies in the second quarter and on hopes of a better tourist season. That is much faster than the 4.3% expansion it had forecast in May. The rebound from the economic crisis caused by the pandemic is projected to continue next year, when the euro zone is forecast to grow by 4.5%, more than the 4.4% estimated in May. 
• But the Commission warned its estimates were based on the assumption there will be a further easing of pandemic-induced restrictions in the second half of 2021. Risks about the outlook therefore remained high, although they were seen as balanced.

(Source: Reuters)