Euro Area Macro Monitor: Calm before the storm – Danske Bank

Analysts at Danske Bank cite the coronavirus (COVID-19) implications to suggest that the European economics are in for further weakness. Though, the bank report still negates imminent rate cuts from the ECB.

Key quotes

With the spread of COVID-19 infections to Italy and thus the European continent, the coronavirus crisis has morphed from mainly a supply shock disrupting inputs to production especially from China, into a demand shock as Europeans stay home and postpone their travel plans.

Although the coronavirus has taken the European equity markets and media headlines by storm, it has still not blown down February's PMIs.

We could be in for some volatile inflation prints in the coming months as falling demand for recreational and travel-related services weighs on service price inflation.

Although inflation volatility might increase, we do not think new ECB rate cuts are imminent.

In Germany, the Angela Merkel succession race has intensified with the new CDU party leader already to be decided at a special party convention on 25 April.