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The rebound of production? Short term. The FT is not optimistic, after all, a sick system cannot but recover

If the cheerful minister Gualtieri now sees a very rapid resumption of growth in 2021 and is imbued with a "rosy optimism", someone is much less optimistic and, perhaps, knows a little more about economics than the government musician. The Financial Times publishes an article which highlights how the rebound in sentiment, in high-frequency surveys, relating to production in the euro area, showed a significant weakening after the strong rebound in June.

While German manufacturing activity continued to rise, indicating that at least there is some confidence in Germany, in France there was a surprise contraction of the index in July and some economists expect a slowdown in Italy and Spain when their sentiment data is released next week.

So we can think that while eurozone industrial production, orders and export data all rebounded vigorously in June, they are likely to have lost some momentum over the summer. The data of the transit of products on German roads have returned to the pre-Covid level, but this concerns only Germany and the French industrialists themselves note that, although current orders are good, there are no customers who are rebuilding stocks. Moreover, the PMI of the euro area is clear

"Gains Plateau" means that its growth has zeroed and therefore a subsequent fall is being prepared, as it was in almost all of 2019. Moreover, the German central bank itself declared last week that, despite the recent rebound, the euro zone producers operated at only 72% of their total capacity in July, well below their long-term average of over 80%. so even Germany is not at its best. The Financiat Times rightly notes that the lack of growth is linked to uncertainty, with many workers, not only in Germany, but also in Italy and France, they do not know if they will have fixed term contracts confirmed in the coming months, in the face of a economy stammering with the “Covid Tango”. Clearly this important slice of consumers does not make lasting purchases, on the contrary they save as much as possible, to face the uncertainties of the future, and therefore the industrial restart can only be uncertain. Furthermore, what until a few months ago was seen as the great locomotive of the future, services, have undergone a powerful slowdown:

Until Covid-19, services were growing, with PMIs always above 50, but after Covid-19, despite the rebound, we are returning to negative.

The problem is that the very structure of the various aids, or rather NOT aids, studied at European level, are such as to feed uncertainty. when the use of monetary instruments is not allowed, funds are built (SURE, MES, Recovery fund) that already now we know will convert into higher taxes for their return, you can understand that you cannot create certainty in growth , but they are uncertain about employment.

If the basic design of an economic system is fallacious as long as we are in normality it will go on by inertia, however facilitating one part at the expense of another, but at the first crisis we will have that the differences already present will intensify further. So the euro, or rather the rules that affect it, will be the cause of the harshness of the recession. We should not suspend them, but cancel them and replace them with a guide linked to unemployment understood in a more rigid way than the current one, otherwise we will have a prolonged depression. I'm sorry for the confident musicians, but especially for the Italians.


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The article The rebound of production? Short term. The FT is not optimistic, after all, a sick system cannot but recover comes from ScenariEconomici.it .


This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/il-rimbalzo-della-produzione-di-breve-durata-il-ft-non-e-ottimista-del-resto-un-sistema-malato-non-puo-che-non-riprendersi/ on Sun, 23 Aug 2020 17:11:54 +0000.