Economic Hardship vs. Policy Deluge
The Covid-19 induced temporary knock out of the euro area economy has been increasingly showing up in the data. In Q1 activity receded by 3.8% qoq with all economies reporting contracting output. Sharply falling industry orders (-13.2% mom) amid a turnaround of the unemployment rate (7.4%, from 7.3% before) in March imply that Q2 will be much worse. In April, the economy was in full lockdown and key sentiment indicators plummeted to unprecedented low levels. In May, sentiment advanced while remaining in territory clearly consistent with a very sharp recession.