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    EcoWeek of 14 February 2020
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    Putting a number on the consequences of the coronavirus is a huge challenge. On some of the topics we have a satisfactory level of visibility of the order of magnitude: international spillover effects of the demand shock, repercussions of the global increase in uncertainty. The visibility is much lower concerning the effects of the supply disruption. This is even more the case for the impact on China. In the near term, data surprises –the difference between the consensus forecast and the outcome- should be higher than normal. However, provided that the peak of the epidemic is reached quickly, visibility should improve quickly and hence support confidence.
    Credit impulse in the euro zone stabilised in December 2019 (up 0.3%, as in November) against a background of a slight slowing of real GDP growth in the fourth quarter (1.0% from 1.2% in the third quarter). Outstanding bank lending to the private sector maintained its pace of growth in December (up 3.7% year-on-year). For the second month in a row, growth in lending to NFCs was less than that in lending to consumers. The slowdown in growth in lending to NFCs (where the year-on-year figure fell from 3.8% in October to 3.2% in December) was due mainly to lower investment spending (in France, Germany and most particularly Spain). This was in part offset by strong growth in consumer loans (from 3.5% to 3.7%). For the first time since 2013, more banks are expecting demand for credit from NFCs to slow (first quarter 2020). In contrast, expected demand for consumer mortgages remains strong, driven by low interest rates, particularly in France.
    EcoWeek of 07 February 2020
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    From an economic perspective, the coronavirus epidemic represents a combination of a demand, a supply and an uncertainty shock. The weight of China in world economy, its contribution to global GDP growth and its role in global value chains imply that the international repercussions are more far-reaching than during the SARS crisis in 2003.We have to brace for poor data in February and March, so the real test is whether April sees a pick-up in business surveys. Absence thereof would fuel concerns that the impact is more lasting in nature which would put us in a U-type scenario.  An L-type scenario looks unlikely as yet whereas a V-type recovery would supposes a swift decline in new cases.
    According to its first estimate, Q4 19 US growth reached 2.1% q/q (saar), matching expectations. No bad news is good news. The fact that the growth rate is keeping pace with the two previous quarters (it has notably been its average pace since the start of the cycle mid-2009) can also be seen positively. Growth remains moderate however and its breakdown paints a mixed picture. In fact, the very positive contribution of net exports saves the day. But this positive contribution results from a negative evolution: the plunge in imports, also to be weighed against the very negative contribution of change in private inventories. On the personal consumption expenditures side, the significant deceleration was expected after two quarters of very strong growth. In contrast, the third decline in a row of nonresidential investment is more concerning. Q1 20 growth prospects look mixed. On the positive side, residential investment is likely to grow strongly for the third quarter in a row. Change in private inventories could also provide additional support: a technical rebound is possible indeed after three quarters of negative contribution. The three key surveys (manufacturing ISM, non-manufacturing ISM, Conference Board consumer confidence index) all surprised on the upside in January. The manufacturing ISM index has rebounded significantly and has crossed the 50 threshold again for the first time since July 2019. The non-manufacturing ISM index also slightly improved, for the second month in a row, to a level that corresponds to its long-term average. Consumer confidence materially increased again, from an already high level. Last but not least, the January employment report also surprised positively, with 225k non-farm payrolls added, a clear improvement after the disappointing December figure (147k). However, the Conference Board leading economic indicator downtrend, already dating back to mid-2019 and albeit of limited scope, is a negative signal to be closely monitored. Moreover, we have to expect that the economic indicators for the next two months at least (February and March) will be negatively impacted by the coronavirus outbreak.
    EcoWeek of 31 January 2020
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    Recent survey data have picked up, in particular in the manufacturing sector and in terms of export orders. The European Commission noted a marked increase of economic sentiment in the European Union, the eurozone, Germany and France in January, after substantial weakness in Q4.  Although economists expect a pick-up in growth in the US as the year progresses, the dispersion is very wide. This means that the median forecast will inspire less confidence than if the level of disagreement amongst forecasters would be lower.
    The economic indicators on our radar screen portray a French economy that is still looking rather strong and upbeat. In the recent period, most indicators are higher than their long-term and short-term averages, i.e. the momentum is slightly positive. Specifically, the signals from survey data (available through January) are more positive than hard data concerning activity (which are not as up to date, with November and December being the most recent months). A priori this augurs well for growth in early 2020...

On the Same Theme

ECB, Fed: Central banks redefine their strategies 2/11/2020
The European Central Bank, like the Federal Reserve in the US a few months ago, has officially launched its own strategy review at the 23 January monetary policy meeting. This is an ambitious plan. The communication in the months ahead will provide us further details regarding the goal of the review and what changes will take place.
From the CFA Franc to the Eco, a smooth transition 2/11/2020
CFA Franc of eight West-African countries will face major changes in 2020. Beyond the change of name, governance will be modified. However, fundamentals remains and several hurdles will have to be overcome before to see further reforms.   
The economic consequences of the coronavirus 2/7/2020
The outbreak of the coronavirus is a textbook example of an exogenous shock. It forces a rethink of the scenario for growth for the next months by looking at the demand and the supply side effects.
Towards a slight growth pick-up 1/24/2020
In recent months, the global manufacturing cycle has been bottoming out whereas in services a slight uptick has been noted. In addition, two major sources of uncertainty have seen a positive development: the US and China signed a trade deal and the UK and the European Union can at last start negotiations about their future relationship. Very accommodative central bank policy has contributed to buoyant market sentiment. The combination of these three factors - stabilisation of business sentiment, decline in uncertainty, supportive financial environment - implies conditions are met to see some uptick in growth. Nevertheless, caution prevails in this assessment, if only because later on this year, uncertainty may very well increase again.
The US-China trade deal: relief, for now 1/17/2020
The phase 1 trade deal signed between the US and China brings an end, at least for the time being, to several years of rising tensions.
Markets and geopolitical uncertainty: (ir)rational complacency? 1/10/2020
There is a considerable gap between what are considered to be the geopolitical ramifications of the escalating tensions between the US and Iran since the start of the year and the subdued reaction of markets. The market reaction probably reflects the investors’ view that the probability-weighted impact on growth should be very limited because the risk of a major escalation is considered to be small and/or because of an expectation that the impact of higher oil prices on the economy is limited. What also may play a role in the market reaction thus far is that, leaving the geopolitical uncertainty aside, the economic environment is considered to be conducive to taking risk: stabilisation of survey data, reduction in trade-related uncertainty and accommodative monetary policy.
Sustainable and inclusive growth: the role of cities 12/23/2019
Cities today concentrate more than half of the world population and more than 80% of global GDP. The underlying dynamics explaining their ever increasing importance are the result of a variety of positive externalities (thicker labor markets, knowledge spillovers, input sharing…) generating self-reinforcing effects. These rapid waves of urbanization have key implications for the production of goods and services, environmental quality and human development. The world is one of density spikes and disparities, driven by the unstoppable ascendance of metropolises. Greener and more inclusive cities should be promoted in order for them to remain livable. In this respect, public policies have an important role to play
2019: a difficult year, ending on a hopeful note 12/20/2019
2019 has been dominated by uncertainty, in particular about trade tensions and hard Brexit risk, as well as mounting concern about the slowdown of the global economy. his has led to additional policy easing by the ECB whereas the Federal Reserve has reversed course by cutting the federal funds rate on several occasions. This has further reduced the remaining policy leeway of central banks, a subject that will be analysed in the context of the strategic reviews by the Fed and the ECB. It has also led to increased calls for fiscal stimulus. Equity markets have delivered surprisingly strong returns with investors preferring to look at the role of lower interest rates, rather than at the weakening of the profits outlook. The year ended on a hopeful note with the improvement of certain business surveys.
Uncertainty indicators have eased 12/20/2019
We monitor uncertainty by means of different metrics and several have eased as of late. Starting top left and moving clockwise, the economic policy uncertainty index, which is based on media coverage, has declined although it remains at a high level...
What 2019 tells us about 2020 12/20/2019
The topics which have characterised 2019 are expected to remain very relevant in 2020: slow growth, elevated uncertainty, low inflation, low interest rates.

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