The Eurozone economy reopened in the month of May after almost two months of full lockdown in Italy and Spain and a partial one in the North part of the continent.
Signs of economic improvement already appear on charts, and it is time for economists and traders to make the most of the new data.
Rising Mobility and Business Expectations
Before anything, no economic recovery is possible while having closed economies. One of the pillars of the European Union is the free movement of labor and capital, and that was possible during the coronavirus lockdown.
Now that the borders are reopening, Europe prepares for summer. Summer in Europe means holidays, but this time is different for all countries – both the ones taking in tourists (e.g., Spain, Italy, Greece, Malta), and the ones responsible for most of the summer holiday traveling (e.g. Germany, the Netherlands, Denmark, Finland, Sweden, Austria).
The new reality since the first wave of coronavirus infections is likely to differ massively from what we were used to so far. Traveling and the way we do businesses will never be the same for the duration of the pandemic, so economic numbers are expected to disappoint in comparison to pre-crisis levels.
The first signs of economic recovery already appeared. In some cases, optimism levels took many by surprise. For example, the ZEW indicator of economic sentiment for Germany rose by 12.4 points from the previous month. It reached 63.4 in June; the highest level reached since the first quarter of 2006.
Mobility trends for both retail and recreation started to reverse the declining trend – they appeared to have bottomed in March and April. Spain, Germany, Italy, France – they all registered a rise in the mobility trends, a signal that people have started to come out, and businesses are beginning to serve customers. Even the truck toll mileage in Germany recovered dramatically from its lower levels during the lockdown.
Speaking of Germany, the government is one of the most proactive in the world. It opened the spending tap like never before, dwarfing the reaction of many of its European peers.Which has been in line with what the IMF called for, by asking many governments to do and spend as much as possible until the crisis is over.
We are still far away from numbers and ratios were seen before the pandemic crisis. While economic growth in the second half of the year is possible, it will likely be anemic.
However when you are down, the positive thing is that you can only move up once you reach bottom. This is the feeling in Europe and, likely, in the rest of the developed world.