Eco week 21-13 // 2 April 2021
economic-research.bnpparibas.com
6
ECONOMIC PULSE
EUROZONE: ECONOMIC IMPROVEMENT AGAINST A BACKGROUND OF EPIDEMIC RESURGENCE
The resurgence of the Covid-19 pandemic in Europe has led to new Hard data are starting to confirm this performance. Industrial
health measures in most countries: restrictions were extended to the production in the eurozone has rebounded significantly over the past
entire territory of France; Germany tightened its border controls; and year. It is also observed in the services sector. However, the latter
Italy extended restrictions until the end of April. Given this difficult continues to be more directly affected by health measures. Although
situation, the eurozone economy sent some signs of improvement the services sector PMI gained ground in March (taking it to 48.8,
over the last three months, compared to the previous quarter. These from 45.7 in February) after several months of stagnation, it remains
dynamics are displayed in the chart below, with the blue area beyond below 50, and thus in contraction territory. A sustained recovery in
the dotted line for almost all indicators.
the services sector relies on consumer spending. This in turn will be
supported by consumer confidence within the eurozone – which has in
fact improved, but remains below pre-crisis levels. A rapid and lasting
economic recovery will only be possible when the pandemic is brought
fully under control, in other words once the vaccination campaigns in
eurozone member states have been stepped up. Fiscal and monetary
policy will remain accommodating until a return to more normal
economic conditions. The European Central Bank, in particular, will be
careful to ensure favourable financing conditions for economic agents.
The current marked increase in inflation results largely of temporary
factors, and will not change the monetary policy stance.
Without over-optimism, the latest data send positive signals about
the eurozone recovery, partly reflecting the adaptation of European
populations to the health measures in force. The manufacturing sector
has done particularly well. The Purchasing Managers Index (PMI) for
the sector has been on a rising trend since the spring of 2020 and the
improvement over recent months has been clear. Indeed, in March, it
reached a new record high of 62.5, driven in part by the strength of the
‘
new export orders’ and ‘employment’ components (which hit 62.4 and
4.7 respectively). All of these indicators are above their long-term
average.
5
Louis Boisset
QUARTERLY CHANGES
3
-month moving average (actual)
M3M (actual)
Effective Exchange Rate
2
.0
--- 3-month moving average (4 months ago)
M3M( 4 months ago)
Core HICP
1.5
PMI Manufacturing
1
0
0
.0
.5
.0
Unemployment Rate
PMI Services
-
-
-
-
-
-
0.5
1.0
1.5
2.0
2.5
3.0
Real Money
Supply M1
PMI Manufacturing
Employment
PMI Manufacturing
New Export Orders
Retail Sales
Industrial Production
Economic Confidence
Business Climate Indicator
SOURCE: THOMSON REUTERS, BNP PARIBAS
The indicators in the radar are all transformed into ‘z-scores’ (deviations from the long-term average, as standard deviations). These z-scores have mean zero and their values
are between -3 and +2. In the radar chart, the blue area shows the actual conditions of economic activity. It is compared with the situation four months earlier (dotted-line). An
expansion of the blue area compared to the dotted area signals an increase in the variable.
The bank
for a changing
world