Intesa Sanpaolo : The EU recovery plan was approved by the European Council on the first try, although somewhat reduced.
Weekly Economic Monitor – 24 July 2020
Intesa Sanpaolo – Research Department
The share of transfers remains substantial, although lower than in the initial proposal. The price paid was a downsizing of the program to combat climate change and, more generally, of the role of the Commission.
For the net beneficiaries, the transfers will be huge: in order to make a difference, however, they will have to be put to good use to modernize the economy.
The week’s market movers
In the euro area , focus this week will be on advance 2Q GDP data, which will be released on Friday, 31st: we expect a double-digit contraction of economic activity in France, Italy and Spain, as well as for the Eurozone as a whole.
The European Commission’s confidence index should outline a further recovery in July. In the same month, inflation is forecast to drop in Germany (to 0.2%, due to the VAT cut), to remain stable in France (at 0.2%) and in the Eurozone as a whole (at 0.3%), and to increase temporarily in Italy (to 0.3%).
Unemployment is forecast higher in June, both in aggregate euro area terms, and in Germany and Italy.
In the week ahead, focus in the United States will be on the FOMC meeting and on 2Q GDP data. The Federal Reserve could express concern over the healthcare picture and the need for further fiscal stimulus, strengthening forward guidance as a result, by anchoring its monetary policy stance to the inflation objective being beaten.
Data release will include 2Q GDP, which should confirm plunging growth, led by the crash in consumer spending. Consumer confidence in July is expected to correct due to renewed concerns over the resurging contagion and labour market conditions. June orders of durable goods, consumption and personal spending, are all expected to increase. The core consumption deflator is expected higher by 0.2% m/m in June.
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