All Eco TV Week

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Outlook for the second half of the year: it’s not over   7/23/2021
A combination of positive developments has led in the first half of the year to a broad-based improvement in business and consumer sentiment in advanced economies: successful vaccination campaigns, a declining number of new infections, ongoing policy support and positive international spillover effects. Gradually, the ‘mechanical’ recovery in sectors which previously had suffered from restrictions is expected to lose steam. Supply bottlenecks and certain price increases may end up acting as a headwind. The growth cycle, despite a gradual slowdown, is far from over but neither is the fight against Covid-19. There is increasing concern that new variants would lead to precautionary behaviour, thereby weighing on certain spending categories. This concern has already triggered a significant decline in bond yields, despite concerns that in the US inflation might stay higher for longer. It also means that central bank policy guidance will be a key point of attention in the second half of the year.

Vaccination campaign, economic recovery and the Olympic Games: Japan sends mixed signals   7/16/2021
The recent country’s authorities decision concerning the Olympic Games, which will be played behind closed doors, occur when Japanese economic situation is still deteriorated. However, few positive cyclical signals have emerged. Economic agents, and consumers in particular, are regaining confidence. Since the outbreak of the pandemic, the Services PMI has not managed to rise above 50, the threshold that separates economic expansion from contraction. The story is quite different in manufacturing.

Emerging Countries: a still fragile recovery   7/9/2021
The recovery trend is confirmed in EM remains fragile. Household confidence indicators are lagging behind those of business sentiment. Reasons are new waves of contamination, acceleration in inflation and impoverishment caused by the pandemic.

Central Europe: Hike on time   7/2/2021
Central European economies are again experiencing an inflation acceleration. Consumer prices are growing at a similar pace compared with pre-Covid patterns. Producer prices are growing more rapidly: a concern for corporate margins, that adds to the costs associated with ongoing monetary tightening.

Is there a risk of stagflation?   6/25/2021
The 1970s have gone down in history as an era of stagflation, defined as a period of slow or even negative output growth and inflation that is high by historical standards. Two supply shocks in the oil market are considered as a key cause but other factors also played a role. In the course of this year, the lifting of restrictions related to Covid-19 has caused an imbalance between supply and demand, leading to a significant pickup in inflation. There is concern that growth, after being particularly strong, will slow, whereas inflation might stay elevated for longer. This has given rise to comments that stagflation, albeit in a lighter version, could make a comeback. However, this risk seems limited.

France: economy has the wind of optimism in its sails   6/18/2021
The economic indicators available at this mid-point of the year suggest that the French economy is bouncing back strongly as it comes out of its third lockdown. Granted, there are a few negative numbers in the mix. But these are economic activity data from April, most of which still bear the traces of lockdown.

Spain: Loans increased in 2020 for the first time since 2008   6/4/2021
Despite the COVID-19 pandemic which caused GDP to fall by 11% in Spain in 2020, the outstanding amounts of bank loans to households and non-financial corporations increased, which is a first since 2008. This rebound, atypical in times of crisis, can be explained in particular by public measures to support the economy and moratoria granted by banks. However, this increase in lending may only be temporary.

Eurozone: a potential for a positive surprise in the labour market   5/28/2021
The pandemic has caused significant job losses although government support measures have limited the rise in the unemployment rate. A further increase is expected for this year but recent survey data suggest there is a potential for positive surprises in terms of labour market developments: hiring intentions by companies are on the rise.

France: start of the recovery and crisis exit strategy   5/21/2021
At the same time as France’s economic recovery is taking shape, the government is also developing its crisis exit strategy, i.e. the way in which the safety net of emergency measures will be gradually withdrawn as the recovery progresses. This will be a tricky task.

Italy: why the country is once again attracting attention   5/7/2021
The arrival of Mario Draghi as head of the Italian Council in February has sparked renewed attention for the country. The former ECB president seems to have given a clearer political path and will oversee the implementation of the massive €235 billion stimulus package. The latter legitimately raises a lot of hope in the peninsula.

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On the Same Theme

Is there a risk of stagflation? 6/25/2021
The 1970s have gone down in history as an era of stagflation, defined as a period of slow or even negative output growth and inflation that is high by historical standards. Two supply shocks in the oil market are considered as a key cause but other factors also played a role. In the course of this year, the lifting of restrictions related to Covid-19 has caused an imbalance between supply and demand, leading to a significant pickup in inflation. There is concern that growth, after being particularly strong, will slow, whereas inflation might stay elevated for longer. This has given rise to comments that stagflation, albeit in a lighter version, could make a comeback. However, this risk seems limited.
Central bank digital currency: what are we talking about ? 6/10/2021
While central banks are considering whether (or not) to launch their own digital currencies so as to counter private crypto-assets, the design of these central bank digital currencies will be of the utmost importance with regard to their consequences on the financing of the economy and the monetary policy transmission.
PMI: price pressures continue to build, reaching very high levels 6/7/2021
The global manufacturing hardly moved in May, which shouldn’t come as a surprise, given its already high level. There was little change in the new export orders at the global level. 
Economic outlook: spring is in the air 4/9/2021
Economic statistics for the first part of this year are better than expected, including in Japan and the euro area. Moreover, this development is broadening in terms of sectors. Looking at business surveys, there is a growing feeling of beginning to “see the light at the end of the tunnel”.
Bitcoin’s buyer beware 3/15/2021
Based on an overview of the functions of a currency, cryptocurrencies should be considered as an investment instrument, rather than as an alternative to fiat money. Since the start of 2020, correlations between bitcoin and copper, equities and, in particular, breakeven inflation have increased. Probably, investors turn to bitcoin when inflation expectations are on the rise. Swings in investor sentiment also play a role. The extent of the change in the bitcoin price suggests that speculative waves are at work, driven by momentum buying and extrapolative expectations of price appreciation. When the fundamental value of an instrument like a cryptocurrency is very hard if not impossible to determine and when short-term price changes are a multiple of those observed in equity markets, caution should prevail when building and managing an exposure.
The bond market turmoil: causes and consequences 3/11/2021
In recent months, US government bond yields increased significantly on the back of higher inflation expectations but more recently, higher real rates have been the key driver. The latter development is in turn related to the prospect of massive additional fiscal stimulus. Unsurprisingly, the dynamics in the Treasury market have had global spillover effects, raising concern about an unwanted tightening of financial conditions.
Does the rise of bond yields call for yield curve control? 3/5/2021
In the US, the prospect of a huge additional fiscal stimulus against a background of a fast pace of vaccination, has recently caused a significant increase in Treasury yields.
The migration of risk in 2021 1/15/2021
Risk and uncertainty never disappear but their nature, intensity and economic consequences evolve over time. 2021 should be the perfect illustration.
Special Edition – 2021: hopes and challenges 1/7/2021
2021 is a year of hope with the arrival of vaccines. Health-related and economic uncertainty should ease significantly, and better visibility will help boost consumer and business confidence and thus drive economic growth. It is also a year of hope for the climate thanks to European initiatives and the prospect of a change of policy direction in the US. But these hopes bring challenges. How will we manage government debt? How might financial markets react if growth surprises on the upside?
What difference will the pace of vaccination make for the economy? 1/7/2021
The introduction of vaccines will enable the global economy to make the shift from a stuttering recovery, shaped by a series of lockdowns and their relaxations, towards a steadier growth trend. A key factor will be the gradual reduction in uncertainty, which will encourage households to spend and businesses to invest. The quicker we reach collective immunity, the stronger this economic momentum will be.

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