Based in Paris, BNP Paribas' Economic Research Department is composed of economists and statisticians:
The Economic Research department’s mission is to cater to the economic research needs of the clients, business lines and functions of BNP Paribas. Our team of economists and statisticians covers a large number of advanced, developing and emerging countries, the real economy, financial markets and banking. As we foster the sharing of our research output with anyone who is interested in the economic situation or who needs insight into specific economic issues, this website presents our analysis, videos and podcasts.
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Despite more than 80% of the adult Italian population having received a full vaccination schedule, the government has decided to introduce new constraints to keep the Covid-19 epidemic under control. At the economic level, the impact of this decision is likely to be felt most in the labour market, accentuating labour shortages, and particularly in the transport sector, where between 25% and 30% of workers still do not have the health pass, according to estimates from Confreta, the union for the industry.
The sections of our Pulse on industrial production and retail sales deteriorated significantly. This mainly reflects base effects linked to the catch-up in activity in the first half of 2021. In the coming months, household spending could be held back by the rise in energy prices, which shows no sign of slowing down, and possibly also by lengthening delivery times for certain products.
After the disappointing economic growth reported in H1 2021, Spain should record a robust rebound in activity in H2, assuming the health situation does not deteriorate. The inflow of tourists has picked up (but remains historically low) and employment has recovered. Yet inflationary risks are intensifying. With the surge in energy prices, the government was forced to take drastic measures to reduce the energy bill for households, which will weigh on public finances. Faced with a persistently uncertain environment, the government is bound to maintain an expansionist policy when it unveils its 2022 budget this fall, even though the health situation is more favourable for the moment thanks to the high level of vaccinations
Portugal’s vaccination campaign seems to be paying off. It is the country that has vaccinated the most people in Europe – and one of the most advanced in the world – with nearly 85% of the population fully vaccinated at the end of September. The number of Covid-19 cases has fallen sharply after a surge in June-July due to the spread of the Delta variant. Portugal’s economic recovery was slower than in most of the other European countries through Q2 2021, in part because it was hit by a more severe wave of the pandemic last winter. However, employment and housing activity have picked up strongly. As in several European countries, new risks have arisen as the pandemic wanes
In Spain, like in most Western countries, the 2008 crisis caused an unprecedented drop in industrial employment, the pain of which continues to be felt. In fact, there are almost 500,000 fewer manufacturing jobs than in 2008. Some of this decline, however, reflects an increasingly important shift from industrial firms to service offerings, which is not a bad thing. With the Covid-19 crisis and the EUR 69.5 billion Recovery and Resilience Plan (RRP), which will be rolled out over the next five years, strengthening industry in Spain has once again become an important area of focus for the authorities. A quarter of the RRP will therefore be dedicated to this objective
Most indicators confirm that world demand for industrial goods is still going strong, suggesting an accentuation or at least the continuation of the supply-chain problems currently facing many companies. Production pressures are compounded by transport pressures, which were showing no signs of easing in early fall.
The Greek economy is recovering relatively quickly from the Covid shock of 2020, judging by the GDP and employment figures released in early September. Real GDP grew 3.4% q/q in Q2 and was 0.6% higher than pre-Covid levels. Since the beginning of the pandemic, Greece has reported the fourth strongest rebound in activity among the 19 Eurozone member countries. Even though household consumption remained fragile in Q2 (+0.9% q/q) due to health restrictions, investment was once again solid (+4.3% q/q). Employment has also reached levels unseen for the past 10 years. Although these figures are encouraging, they nonetheless fit within a health environment that is still uncertain, with a vaccination rate in the country far below the EU average
Although the pace of growth in industrial production has slowed, our barometer shows significant improvements in exports and retail sales over the last three months (shown in blue) compared to the previous three months (delimited by the dashed line). The second estimate for Q2 GDP, published on 31 August, confirmed a solid recovery (+2.7% q/q), driven in large part by the easing of restrictions and the subsequent increases in consumption.
The Spanish economy has put in a solid performance over the summer, with a marked improvement in the employment data. The number of workers registered with the Social Security system has risen by more than 410,000 over the past three months, and now nearly match the pre-Covid level. The unemployment rate is likely to fall again in Q3 as a result. It already dipped to 14.3% in July, not far from the pre-pandemic low of 13.7%. Given that a significant share of the new hires were seasonal contracts, we will have to wait for this autumn’s employment figures to get a more accurate picture of the strength of the recovery.
Although the momentum remains strong, world trade volumes could begin to taper off this summer, judging by the results of recent opinion surveys. The global PMI index declined 2 points to 56.6 in June, pulled down by the drop in the manufacturing “new export orders” component.
Once again, Spain has become an epicentre of the Covid-19 pandemic in Europe after new cases of the Delta variant spiked, especially in Catalonia. The number of new contaminations could rapidly surpass the peaks reached during previous waves of the pandemic. The days and weeks ahead will tell whether the vaccination campaign is paying off – more than 50% of the population is now fully vaccinated (2 doses) – and whether the authorities can limit the reintroduction of health measures that restrict economic activity.
Just when the lights seemed to be turning green on the health front, the spread of the Delta variant in Spain, as elsewhere in Europe, is a cause of concern. The risks remain currently under control and economic activity should record a significant upturn this summer. The easing of travel restrictions and the introduction of the European health pass since 25 June should allow the Spanish tourist industry to lift itself back up, which would have positive knock-on effects on consumption and employment. Even so, and despite the fact that growth is expected to bounce back strongly, to 6.0% in 2021, the Covid-19 will continue to leave its mark on Spain’s public finances
The Greek economy is proving resilient, with the recovery through to Q1 2021 being faster than in most other Eurozone members. This has been driven primarily by the very significant increase in goods exports. The spread of the Delta variant in Europe represents a threat to the recovery in the tourism sector, which is essential to bolster growth and employment over the coming months. Pending this, the labour market shows continued fragility. The unemployment rate climbed to 16.3% in Q1, whilst the number of inactive workers jumped, partly due to the effect of rising numbers of workers on temporary unemployment
The Pulse for Italy continues to improve reflecting both a genuine economic rebound and positive base effects arising from the drop-off in activity in H1 2020. Base effects were especially strong in industrial production and retail sales, which in April were still below the year-end 2019 levels.
Despite a sharp increase in May (+1.98%), eurozone inflation continues to be driven by two components of the consumer price index (CPI) that are linked to energy prices. “Operation of personal transport equipment” was by far the biggest contributor to the rise in the CPI with a contribution of 0.87 percentage points (pp), or nearly half of headline inflation. This reflects the increase in pump prices. It is followed by “Electricity, natural gas and other fuels”, which contributed 0.43 pp to Eurozone headline inflation
Indicators related to international trade remain very strong. Even though the most recent CPB figures are for March, world trade in volumes (both exports and imports) increased 2.2% m/m, pushing the quarterly rise to 3.5% in Q1 2021. This represents a solid growth that was almost identical to that recorded in the previous quarter.
The latest economic figures from Spain have shown so far a substantial gap between the very positive signals from opinion surveys and the hard data, particularly on consumption, where a significant rebound has yet to materialise.
The Italian economy is continuing to improve, as shown in the latest gains in our Pulse. Industrial activity, which had already enjoyed a significant upturn over the winter, strengthened further this spring: the manufacturing PMI reached 60.7 in April, the best reading on record.
World trade in goods has rebounded very strongly, even though major divergences exist between regions due mainly to widely contrasting health and economic situations. The turnaround in services exports has been much slower, with transport and tourism still holding at very low levels. Trade in information and communication technology (ICT) services was much more resilient in 2020. Brexit triggered a sharp increase in the number of new trade agreements in 2021. Two major trade agreements negotiated by the European Union are still pending, one with Mercosur and the other with China. Negotiations between the United States and China are also at a standstill after the failure of bilateral talks held in Alaska in mid-March.
After disappointing Q1 GDP figures – which showed the economy contracting again, by 0.5% q/q – the second quarter should bring the start of the much-anticipated recovery in Spain. The improvement in the Covid-19 situation is continuing to have a knock-on effect on business and consumer confidence, which brightened again in April, as shown by our pulse.
Italy’s cyclical improvement continues. This is reflected in our pulse, with several indicators rising above their long-term average. This is especially true for indices pertaining to industrial activity. The Purchasing Managers Index (PMI) for the manufacturing sector rose to its highest level in 21 years.
Eurozone inflation rose markedly in Q1 2021 and seems to be extremely volatile. Core inflation, which is usually stable, has been moving in fits and starts.The rebound in goods prices largely explains the broad increase in inflation. Prices of tradeable services have also picked up, notably in the sectors that were hit hardest by the pandemic, such as transport. The recent acceleration in prices is being driven by temporary factors: changes in VAT rates, higher crude oil prices, and the revision of HICP weights. Inflation could continue to rise over the next few months.These temporary effects should dissipate at the beginning of next year. Thereafter, there seems to be very little risk of an inflationary surge in the Eurozone.
The barometer improved in March, driven by the manufacturing sector, where growth continues to pick up strongly. According to the purchasing managers index (PMI), confidence in the Spanish manufacturing sector has increased to 56.9, the highest level in more than 14 years.
Economic growth remains extremely fragile in early 2021. In addition to the Covid-19 pandemic, Spain was hit by Storm Filomena in early January, which has had a direct negative impact, notably on consumption: both automobile and retail sales plummeted this winter. We now expect GDP growth to be flat in Q1. Even so, the economy could rebound strongly either this spring or more certainly by summer, although we cannot completely rule out the downside risks associated with the UK variant and a possible fourth wave of the coronavirus in Spain. We are forecasting real GDP growth of 5.9% in 2021 and 5.6% in 2022, following a record contraction of 10.8% in 2020.
Portugal was one of the European countries hit hardest by the third wave of the coronavirus pandemic this winter. The government reinstated a “strict” lockdown that drastically reduced the spread of the virus. A very gradual reopening plan was launched on 15 March and will end on 3 May. Hopes for a solid economic recovery hinge on the vaccination campaign currently underway, but like elsewhere in the European Union, it is progressing at a slow pace. The success of the UK vaccination programme nonetheless raises promising prospects for the recovery of Portugal’s tourism sector, which is highly dependent on British tourists. Real GDP could rebound by as much as 5-5.5% in 2021, after contracting by 7.6% in 2020.
