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Intesa Sanpaolo : Eurozone

Intesa Sanpaolo : Eurozone : in the second quarter of the year economic activity risks plummeting at a double-digit rate.

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Weekly Economic Monitor – 27 March 2020

Intesa Sanpaolo – Research Department


If the shutdown does not last too long, this will not compromise the possibility of a rebound. However, safeguard measures are needed. Fiscal stimulus has reached 2% of GDP in the Eurozone. Germany has unveiled an emergency budget worth 120 billion euros, and drastically cut tax revenue forecasts. Other countries will step up their efforts in the weeks ahead.

The Eurogroup is ready to launch an ECCL with modified terms, which would also pave the way for the launching of OMTs by the ECB, but nothing more. On its part, the European Central Bank has confirmed the high operational flexibility of the PEPP.

United States – The economy in the time of COVID-19 : violent quarterly GDP contraction expected in Q2, collapse of the labour market as never witnessed before, policy response unthinkable until only a week ago.

The week’s market movers

Busy week ahead in terms of data releases in the euro area . Focus will be on the flash estimates of March inflation: the CPI is expected to slow by six tenths to 0.6% in aggregate Eurozone terms, by five tenths to 1.2% in Germany, by four tenths to 1.2% in France, and by five tenths to -0.3% in Italy, dropping into negative territory.

Confidence surveys will include the Eurozone ESI economic sentiment index, forecast to drop to 70.0 from 103.5. February unemployment is estimated stable in the Eurozone at 7.4%, as opposed to a possible two-tenth resurgence in Italy, to 10%; in Germany, the March reading could outline a reversal, with the unemployment trend picking up by one tenth to 5.1%. Lastly, retail sales in the Eurozone are expected to increase in February by 0.7% m/m from 0.6% m/m, although we expect them to plummet already in March.

In the United States, the main data for March will be released, but some information will be already obsolete. The focus will be on initial unemployment claims, not too far from last week’s record high of 3.283 million.

The March Employment Report should outline a moderate increase in nonfarm payrolls, as the survey week preceded the outbreak of the epidemic in the US, and the unemployment rate just marginally higher at 3.6%.

March ISM indices should track the other monthly surveys, plunging to record lows in the non-manufacturing sector as opposed to a more modest correction for manufacturing. Consumer confidence is also forecast to deteriorate sharply in March.


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