Intesa Sanpaolo :The acceleration of the crisis on the European financial markets has prompted the ECB to announce new measures just one week after its monetary policy meeting.
Weekly Economic Monitor – 20 March 2020
Intesa Sanpaolo – Research Department
The stepping up of the asset purchase programme will result in the Eurosystem absorbing considerably more than the net issuance of public debt in 2020. In the meantime, the advance estimate of the Ifo index shows that Germany is also heading for a rapid and violent recession, like Italy.
The same should be expected in many other European countries, albeit at a time lag. GDP contraction in 2Q could amount to around 5%.
The US economy is on the verge of a new recession .
Uncertainty on the outlook is growing, together with the reach of the Covid-19 pandemic and the transmission of its effects on the health, economic and financial fronts. Response from the fiscal and monetary authorities has been massive, and will probably increase in the weeks ahead.
The week’s market movers
In the euro area , economic confidence indicators will report a widespread plunge in sentiment among economic operators, triggered by the spreading of COVID-19 across the continent. We expect the advance estimate of the March manufacturing PMI to drop deep into contractionary territory and to hit the long-term low. The surveys should be consistent with a contraction in business, comparable only to the one recorded during the Great Crisis of 2008.
Many of the data releases lined up for this week in the United States will be influenced only in part by the effects of Covid-19 on the economy and the markets, but most information will generally be negative nonetheless. The main updates for the scenario will be consumer confidence and the flash estimates of PMI indices. Consumer confidence should worsen further, as also the Markit PMIs, with the services sector sending particularly negative indications. Personal spending in February should start to register a slowdown due to the initial effects of the epidemic, on the services sector in particular. Personal income, tied to the data already released as part of the monthly Employment Report, should be up by 0.3% m/m, providing only formal reassurance. The consumption deflators should be up by 0.1% m/m in terms of the headline index, and by 0.2% m/m for the core component. Orders of durable goods and new home sales should drop in February. The final estimate of 4Q GDP is now ancient history, should be confirmed at +2.1% y/y ann.
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