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Intesa Sanpaolo : The Eurozone and the response to the health emergency

Intesa Sanpaolo : In the Eurozone, the response to the health emergency remains an almost exclusive responsibility of the individual member states.

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Weekly Economic Monitor – 10. April 2020

Intesa Sanpaolo – Research Department


However, the Eurogroup has approved two specific financial support measures: the SURE programme, to refinance in part the measures designed to support employment programmes, and the ESM Pandemic Crisis Support, to finance healthcare spending on cure and prevention. Combined, the two measures are worth 340 billion euros.

US – Labor market collapse: some unpleasant economic arithmetic. New jobless claims and the March Employment Report drew a dramatically negative picture of the labor market. Unfortunately, this is just the tip of the unemployment iceberg expected to emerge in 2Q. A saving grace in the current environment is that being without a job does not necessarily imply being without income.

The week’s market movers

In the Eurozone, the second readings of March inflation will be released: euro area inflation should be confirmed at 0.7%, down from 1.2% (core index down to 1.2% from 1.3%), German inflation at 1.3% from 1.7%, the French index at 0.7% from 1.4%, and the Italian at zero from 0.1%. Furthermore, Eurozone industrial output is estimated to rise in February by 0.1% m/m, from 2.3% in January.

Data due for release this week in the United States will start to reflect the effects of the Covid-19 epidemic on real activity, although they will probably represent an underestimation of the ensuing impact in the rest of 2Q. Initial manufacturing sector surveys for April will photograph a sharp deterioration, likely to also affect expectations indices, that had stayed relatively sustained in March.

Data on industrial output, retail sales, housing starts and building permits in March should all drop sharply, and may be influenced by data collection difficulties, especially in the retail sales sector, due to the shutdown of most stores. New jobless claims will again offer the most up-to-date indication of the deterioration of the picture in monthly terms, and should match the levels recorded over previous weeks, in the millions.


Appendix
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Source: BONDWorld