Moreover, exports, which had provided a welcome offset to the weakness in domestic demand through the middle of 2008, fell sharply in the final months of last year, and the incoming news suggests a widespread contraction in activity abroad. Despite the considerable decline in final demand in the United States, businesses have managed to trim inventories in recent quarters.
Russia’s war against Ukraine is heightening the geopolitical tensions between the US and the EU, on the one hand, and Russia, on the other. It is a new, major exogenous supply-side shock to the economies of the EU Member States that also affects, through various channels, aggregate active demand.