The impact of the Covid-19 lockdown continues to take its devastating grip on economies. And the Bank of England (BoE) is keeping rates at 0,1% against a catastrophic drop in 2020 GDP, estimated at -14%. However, the BoE expects a 15% rebound next year and stresses that "the British financial system is solid enough to be able to absorb the losses related to the crisis".
The macro data arriving from the EU are not comforting. And although a decline in industrial production was widely expected, the data from Germany is striking. German manufacturing suffered a very heavy drop in March: -9,2%, a level never reached before and decidedly higher than expected (-7,4% consensus). But what is most striking, notes a report by Goldman Sachs, is that without construction - up 1,8% as it was excluded from the lockdown which affected all sectors in the rest of Europe from 15 March onwards - it would be was even worse: -11,2%. And again, if it is true that all sub-sectors have been hit by the Covid-19 wave, from intermediate to durable goods to consumer goods, the collapse in production in March was disproportionately concentrated in a few sub-sectors: the auto marks a -31,1%, followed by machinery -10,4% and manufactured metals -7,4%. Goldman Sachs expects a worsening in April given the record fall in industrial orders in March: -15,6%.
Germany, of course, is not alone in having suffered the effects of the pandemic. In France, the anti-Covid border cuts industrial production by 16,2% in March. In Italy, the fall in production was 16,6% according to Istat.
