eco TV Week


France: An overview of the recovery plan   9/18/2020

One hundred billion euros is a huge sum, and that is how much the French government will devote to its recovery plan over the next two years. The overall budget is divided roughly into thirds to cover the recovery plan’s three pillars: 30 billion euros for the environment, 34 billion euros to boost competitiveness, and 36 billion euros for social cohesion.

The headaches of the ECB   9/4/2020
The Covid-19 represents a massive disinflationary shock because of the demand shortfall it creates. This has triggered a very strong reaction of central banks across the globe, including the ECB. The ECB’s action –in particular the PEPP- has been successful in maintaining fluid financing, both bank-based and capital-market based. Nevertheless, the ECB has a headache, three actually. Inflation is too low and declining, the strong euro reinforces this development and there is concern that the change in the longer-term goal of the Fed, which will now target inflation averaging 2 percent over time, will complicate matters.

The euro area economy: doing better   7/31/2020
Survey data for the euro area continue to improve. The flash purchasing managers’ indices for July have passed the 50 hurdle in manufacturing and services as well as for the composite index, implying activity is expanding again. In addition, export orders are improving. Although companies feel more confident than the month before, the level of confidence is still rather low compared to historical averages. This is illustrated in the latest data for German and French business sentiment: better but starting from a low level. Caution continues to prevail, which shows up very clearly in the employment component of the business surveys. A lot has to do with the concern about how the pandemic will evolve. Against this background, the fiscal stimulus at the national and EU level will be more than welcome.

The European Council agreement: truly historical   7/24/2020
The EU countries have reached a historical agreement on the recovery fund. Debt will be issued at the EU level and the proceeds will be distributed under the form of grants and loans. Although the amount of grants has been scaled back from the initial Commission proposal, the EUR 750 bn package still represents more than 5 % of EU 2019 GDP. This will enhance the effectiveness of ECB policy. The agreement is also important from a longer term perspective. It sets a precedent that could guide policy in case of future major economic shocks. In addition, the milestones to which countries need to commit should strengthen the growth potential and contribute to the green and digital transition.

Morocco: A sharp recession in 2020   7/17/2020
Despite swift reaction by the authorities and solid fundamentals, the Moroccan economy will suffer from a sharp recession in 2020 due to a powerful external shock and containment measures. The recovery will be modest in 2021.

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On the Same Theme

The take-off of the recovery 9/4/2020
Signs of the French economic recovery since the lockdown was lifted on 11 May are starting to show in our Pulse barometer...
France: Matching surges in non-financial corporations’ funding and deposits 8/26/2020
To cope with the collapse in their revenues during lockdown, French non-financial corporations (NFCs) raised record funding flows. These totalled close to EUR 208 billion year-on-year net of repayments at end-June 2020, or 2.5 times the annual average recorded between 2017 and 2019 (EUR 83 billion). The growth in funding flows stemmed chiefly from bank loans (EUR 118.5 billion at 30 June, including some EUR 106 billion in PGE state-guaranteed loans since 25 March 2020) and also from net issues of debt securities (EUR 89 billion). NFCs’ deposits posted a matching increase (EUR 173.4 billion), and so the annual increase in debt net of deposits remained within the range seen since 2012. Some of the funding obtained was used to pay resident suppliers, triggering the circulation of deposits between resident NFCs. These trends also suggest that some businesses have squirrelled away the funding they have raised amid the current period of uncertainty to make sure they are able to cover their future expenses.
Between a V-shape or U-shape, the recovery hangs in the balance 7/15/2020
After a massive recessionary shock, the French economy has been showing signs of recovering rather rapidly since May, raising hopes for a V-shaped recovery. Markit’s composite PMI index and household spending on goods both rebounded spectacularly, which is encouraging. But these gains were largely automatic and will lessen as the catching-up effect wears off. To return to pre-crisis levels, it will probably take longer to close the remaining gap than it took to regain lost ground so far. There are several explanations: sector heterogeneity, ongoing health risks and the scars of the crisis. We foresee a U-shaped recovery (-11.1% in 2020, +5.9% in 2021). The risks seem to be well balanced, thanks notably to support measures that have already been taken or are in the pipeline.
A V-shaped recovery for France? Not so fast 7/3/2020
Looking at France’s economic situation and prospects, there are grounds for both optimism and pessimism
Much brighter skies in June 6/26/2020
While the economic horizon cleared up a bit in May, the improvement was much bigger in June. Given its construction, our Pulse does not yet show any traces of this rebound, which is just as remarkable as the preceding plunge [...]
The Paris office market: a matter of yield 6/17/2020
As commercial real estate can be seen as a financial asset, analysing spreads between property and government bond yields is a proper way to better forecast price levels.
France: slightly brighter skies in May 5/29/2020
According to May business confidence surveys, France’s economic horizon has cleared up a bit.
The sharp rise in household inflation expectations in April, a signal to be put into perspective 5/6/2020
The sharp rise in household inflation expectations is one of the striking results of the April 2020 INSEE consumer confidence survey. This increase goes the opposite way of the fall in the balance of opinion on price trends over the past 12 months as well as in actual inflation. This large divergence is noteworthy in view of the usual relative proximity of the three indicators. This rise in expected inflation echoes the French people’s feeling, conveyed in the media, that significant price increases have occurred since the lockdown. This is probably the consequence of the composition effect of consumption baskets and not the warning sign of a widespread and substantial pick-up in prices in the making. The more regularly a product is consumed, the stronger the sensitivity to a rise in its price. And this sensitivity can be wrongly extrapolated to all prices. Currently, expenses are mainly incurred on food for which high price increases have precisely been reported as a result of the law of supply and demand. By contrast, because of the lower frequency of refueling, household inflation expectations do not reflect the plunge in oil prices.  

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