Press Release

DBRS Morningstar Publishes Europe Macroeconomic Update: A Bumpy Recovery Amid COVID-19 Resurgence

Sovereigns
October 05, 2020

DBRS Morningstar released its latest edition of the Macroeconomic Update for Europe, discussing how the resurgence of new Coronavirus Disease (COVID-19) cases in some European countries in recent months has increased downside risks to the near-term economic recovery in the euro area (EA) and the United Kingdom (UK). In DBRS Morningstar’s view, the effectiveness of policies in supporting employment and incomes and in sustaining favourable financing conditions, together with the improvement in business and consumer confidence and in global demand, are key to the economic recovery over the longer term.

Some key points from the macroeconomic update include:

-- Although uncertainty has increased and the recovery seems to be losing some momentum, we do not currently expect the second wave in infections in some countries and the reimposition of some restrictive measures to fully derail the recovery. The recovery is set to continue, but at a slower pace and unevenly across sectors and countries.

-- So far, despite the sharp decline in economic activity this year, the impact on unemployment has been somewhat limited. Nevertheless, labour market conditions in the EA have deteriorated, the extended slump in activity within some sectors will likely lead to further deterioration.

-- The UK economy is also recovering, but the pace of recovery is likely to slow. High frequency indicators including the CBI composite indicator that looks back and then forward to the next three months suggest that the recovery is slowing.

-- At the same time, the number of people who are estimated to be temporarily away from work has fallen, although the total number is high. Even with the new "Job Support Scheme", the unemployment rate is likely to increase in the last quarter of the year and this will weigh further on the pace of recovery.

The Macro Update Europe also contains the list of commentaries produced by the Sovereign team in Europe in recent months.

Notes:
The “Europe Macroeconomic Update: A Bumpy Recovery Amid COVID-19 Resurgence” is available at www.dbrsmorningstar.com.

For more information on the impact from coronavirus, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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