7 days of economics


Week of 26 to 04 March 2021
Wednesday 3
Tuesday 2
European Union : Europe: the shock of Covid-19 and the fear of accelerated zombification
Looking beyond the short-term economic shock, the Covid-19 pandemic and the exceptional health protection measures introduced to contain the virus raise many questions as to the lasting consequences of the crisis. The issue of zombie firms, which is far from new, has taken on a whole new dimension, as their weight in developed economies has progressively increased since the 1980s. Massive public interventions to tackle the effects of the pandemic, whether by governments – debt moratoriums, cancellations of employer social security contributions, widespread use of short-time working schemes, etc. – or by central banks – increase and prolongation of asset purchases schemes – could result in keeping non-viable companies afloat, raising fears of a zombification of economies.
Hélène BAUDCHON, Louis BOISSET, Guillaume DERRIEN, Raymond VAN DER PUTTEN 3/2/2021
United Kingdom : The trajectory of UK public finances after Covid
Before the onset of the Covid-19 pandemic, the United Kingdom had already begun to come out of the “age of austerity”, to borrow a phrase from former Prime Minister David Cameron. The massive intervention of UK authorities to support the economy through the Covid-19 sanitary and economic crises has significantly strengthened this trend. The government deficit ran at almost 20% of GDP in 2020, and the ratio of government debt to GDP increased by twenty percentage points to nearly 100%. Once the crisis is over, some adjustments will be needed. That said, the Treasury’s eagerness to bring public finances back under control rapidly could be counterproductive if it stifled the economic recovery. Moreover, long-term prospects, particularly demographic trends, suggest that balancing the government’s books will be no easy task.
Hubert DE BAROCHEZ 3/2/2021
Friday 26
US : Rising bond yields, a concern for equity investors?
Until recently, the rise in long-term interest rates did not stop the equity market from moving higher, but events this week suggest investors are becoming increasingly concerned. The possible impact of higher bond yields on share prices, depends on what causes the increase: faster growth, a decline in uncertainty, rising inflation expectations.The last factor is the trickiest one because it may cause a profound reassessment of the outlook for monetary policy. Over the past two decades, the relationship between rising rates and the equity market has not been statistically significant. Gradualism in monetary policy has played a role. Recent statements by Jerome Powell show he is very much aware of the importance of avoiding to create surprises.
William DE VIJLDER, Tarik Rharrab 2/26/2021
Germany : Hardening lockdown weighs on services
In February, the economic climate has slightly deteriorated compared to the previous month. Our proprietary business climate indicator for Germany - the unweighted sum of the Pulse’s components - deteriorated slightly, to - 0.35 in February compared with -0.1 in the previous month. Since April 2020, the climate indicator has been in negative territory...
Raymond VAN DER PUTTEN 2/26/2021
Italy : The industrial recovery gathers pace
As shown in our barometer, manufacturing activity has continued to strengthen at the beginning of the year. The manufacturing PMI index reached 55.1 in January, the best reading since March 2018. Italian industry is probably benefiting from activity in the US, which is stronger than in Europe...
Guillaume DERRIEN 2/26/2021
Global : Encouraging mobility trends and progress with vaccination campaigns
The latest Google Mobility Report published on 23 February paints an encouraging picture of store footfall and visits to recreational facilities around the world, especially in Europe...
Tarik Rharrab 2/26/2021
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