Narratives – the stories people tell about events – may influence behaviour. In future years, several narratives may very well be used when looking back at economic developments in 2020. Big, unanticipated shocks do happen. In terms of monetary policy, a ‘whatever it takes’ attitude prevails. This also applies increasingly to fiscal policy. In terms of financial markets, the dominant attitude towards risky assets is to buy rather than to say ‘bye bye’. With Next Generation EU, the European Union has again demonstrated that, under pressure, it can make big leaps forward. Finally, attention to sustainable growth has become ubiquitous. Some of these narratives provide comfort but several also come with a warning.
Compared to the US or European economies, Japan has been so far relatively unscathed by the Covid-19 pandemic. The country’s public health measures have been less strict than those implemented elsewhere. A resurgence in infections in Japan and its main trading partners hitting demand would result in a marked deceleration in economic activity in Q4 2020...
At the approach of the holiday season and fearing another resurgence in the coronavirus pandemic, several European countries have tightened their lockdowns to contain the level of contamination. We can expect that in the weeks ahead, these new restrictions will have a clear impact on the momentum of retail and leisure traffic flows. Over the past week, momentum was already stagnant in most of the European countries, as illustrated by the Google Mobility Report released on 13 December...
