Macroeconomic projections for the euro area: Pompeo Pontone’s insight into the outlook for economic activity and inflation in the Eurozone

The fiscal and monetary stimulus enacted by the authorities will play a crucial role in the euro area in the foreseeable future: Pompeo Pontone, a Professional Investment Specialist and Financial Consultant, is convinced of this and, commenting on an article published by Philip R. Lane (ECB Executive Board Member), he discussed about the outlook for economic activity and inflation in the euro area.

“The sustainability of the ongoing rebound in euro area economic activity will inevitably depend on the symmetry of the economic recovery”, the expert said, pointing out the close connection between the rebound in economic activity and the symmetry of the economic recovery. As it has been emphasised in the article, following the record decline in output of 11.8% in the second quarter of 2020 and the cumulative decline of 15.1% in the first half of the same year, a strong rebound took place in euro area economic activity over the course of the third quarter, with the domestic demand significantly bounced back, the consumer spending strongly increased in June and July 2020, and the business investment recovering as well. In spite of this, economic activity in the euro area remains well below the levels seen before the Covid-19 pandemic. In addition, the recovery is largely inhomogeneous across sectors and euro area countries, and still remains subject to a high degree of uncertainty.

“Without the service sector regaining momentum, the economic outlook will continue to look uncertain”, Pompeo Pontone commented. The services sector is the most sensitive to social distancing restrictions and infection fears: the services business activity PMI reached 53.5 in December, as stressed by the Professional Investment Specialist and Financial Consultant: “The slight fall in the global composite output Purchasing Managers’ Index (PMI) to 53.5 in December signalled weakening momentum”, said the expert, who also added that “the banks’ risk perceptions keep increasing as they remain concerned about borrowers’ creditworthiness”.

Finally, Pompeo Pontone concluded his intervention on the outlook for the euro area by pointing out that the ECB fiscal and monetary stimulus still play a central role to continue to provide support for the economic recovery: “The fiscal and monetary stimulus enacted by the authorities will therefore still play a pivotal role in the foreseeable future”, the Professional Investment Specialist said, “and remain essential to preserve favourable financing conditions for all sectors of the economy”.

Further information can be found here:

https://www.ecb.europa.eu/press/blog/date/2020/html/ecb.blog200911~9864e7ae6d.en.html