Goldman Sachs Global Economics Analyst Exhibit 13: Surveys of Gas-Intensive European Industries Have Plunged Source: Haver Analytics, Eurostat, Goldman Sachs Global Investment Research However, we dont expect a deep European downturn, barring a very cold winter that imposes more severe energy rationing on the industrial sector in order to keep people warm in their homes. Already, Europe has cut Russian gas imports by 80% and total gas consumption by 20-25% without crushing aggregate activity. In fact, most of the hard economic data (as opposed to the surveys) continue to hold up remarkably well so far, with industrial production moving sideways, real GDP still up in the Euro area in Q3 (though down slightly in the UK), and labor markets holding up so far. We think the reason for this resilience is that household energy savings and substitution to other energy sources have helped absorb the collapse in Russian gas imports. Along with mild weather, these savings have boosted gas storage, reduced TTF gas prices by 60% from their peak, and reduced downside risk from a very cold winter. Moreover, Europe is likely to benefit from three similar post-pandemic sources of resilience that are helping the US avoid recession altogether. First, Exhibit 14 shows that the rise in German production of chip-intensive items and cars—where pandemic bottlenecks are still easing—has approximately offset the ongoing decline in energy-intensive production. 16 November 2022 12