Euro-Nownat update: a protracted recession

With collapsing April PMIs, our nowcasting model Euro-NowNat has strongly revised down its forecast s for the euro area growth outlook for the first half of 2020: 0 % sequential growth for Q 1 20 20, -3.1% for Q 2 2020 and -3.5% for Q3 2020. Thus, Euro-NowNat expects the recession to continue well into the second half of this year. We would stress, however, that our model necessarily underestimates the economic damage done by the confinement measures, which are unprecedented and therefore hard to “understand” for our model. The model probably also underestimates the massive policy action put in place to stabilize the economy and to prepare the rebound in activity. Thus, our model (and other models relying on past data) need to be treated with caution given how extraordinary the current situation is.