EcoWeek

Taking a step back before the great rebound

Eco week 21-17 // 3 May 2021  
economic-research.bnpparibas.com  
7
ECONOMIC PULSE  
GERMANY: TAKING A STEP BACK BEFORE THE GREAT REBOUND  
The German statistical office Destatis estimates that economic activity which might be related to the lack of improvement in the Covid-19  
shrank by 1.7% in Q1 2021 after robust growth in the second half of pandemic. In particular, business sentiment in the services sector  
2
020 (8.5% in Q3 and 0.5% in Q4). This was largely due to the tightening declined, although the balance of opinion remained positive.  
of the Corona restrictions in mid-December, which has been a drag on  
private consumption. Moreover, construction activity was hampered by  
bad weather. Only the manufacturing sector reported output growth,  
underpinned by strong overseas demand.  
The health situation is also weighing on consumer sentiment. Because  
of a significant decline in economic and income expectations by  
households,theinstituteGfKforecastadecreaseofconsumerconfidence  
for May to -8.8, down 2.7 points from April. This pessimism is undue, as  
This picture is partly confirmed by our Pulse for April, which mainly the labour market is improving, even though it hardly shows up in the  
covers data from Q1. The blue area has remained almost unchanged employment data. In March, employment only marginally improved  
from that in the previous three months (the area within the dashed and was still 1.7% lower (750k persons) compared to February 2020.  
line). The sharp drop in retail sales in the three months to February is However, the number of employees in the short-time work scheme,  
due to the closure of non-essential shops from mid-December onwards. which are included in the employment numbers, is on a declining  
The sharp rise in core inflation reflects the ending of the temporary VAT trend. In March, the scheme was used by 8% of employees, compared  
cut on 31 December.  
with 8.7% in the previous month.  
The economy is likely to rebound very quickly, as business cycle  
indicators have been strengthening since February. In April, the IFO  
climate index inched higher for the third consecutive month. However,  
businesses have become more pessimistic about the coming months,  
Raymond Van Der Putten  
QUARTERLY CHANGES  
Effective  
3-month moving average (actual)  
-- 3-month moving average (4 months ago)  
Exchange Rate  
-
3
2
1
0
.0  
.0  
.0  
.0  
IFO Business Climate  
Manufacturing  
Unemployment Rate  
-1.0  
-2.0  
-3.0  
-4.0  
-5.0  
-6.0  
Industrial Orders  
foreign  
Core HICP  
GFK Consumer  
Confidence  
Industrial  
Production  
New Orders  
Construction  
Retail sales  
IFO Business Climate  
Trade  
IFO Business Climate  
Construction  
SOURCE: THOMSON REUTERS, BNP PARIBAS  
IFO Business Climate  
Services  
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 -6 and +3. 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  
QUI SOMMES-NOUS ? Trois équipes d'économistes (économies OCDE, économies émergentes et risque pays, économie bancaire) forment la Direction des Etudes Economiques de BNP Paribas.
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