Period: 27 June – 3 July 2020
Top news story: Two major developments this week:
- First, Federal Reserve System announced a launch of a new emission programme.
- Second, major Chinese companies deemed a threat to U.S. national security: Chairman of the Federal Communications Commission (FCC) Ajit Varadaraj Pai said, «Based on solid evidence, FCC today declares Chinese companies Huawei Technologies Co. and ZTE Corp to be a threat to US national security for US communications networks and for our 5G future».
From the point of view of basic economic processes, this confirms two main conclusions about the development of the situation in the coming months:
- Firstly, there are no objective grounds for the recovery of the world and American economies.
- Secondly, a unified global financial system will no longer exist, even on a reduced scale.
Last week’s recovery expectations were not met.
Britain’s GDP in January-March was even lower than expected: -2.2% per quarter (the lowest for 41 years) and -1.7% per year (the lowest for 11 years):
A similar pattern was observed at the beginning of the year in Spain (-5.2% per quarter and -4.1% per year), and in Canada in April GDP collapsed by a record 11.6% per month after -7.5% in March. Let us recall – these are the data of the 1st quarter or the beginning of the II, i.e. the beginning of the COVID-19 pandemic.
Exports from the US are the lowest since 2009:
Very low job growth in the US private sector:
Whereas the number of recipients of unemployment benefits has even increased:
However, according to the Ministry of Labour, the situation is better in both the private sector:
And the economy as a whole:
This discrepancy is due to the fact that the Ministry of Labour, under the pressure of political circumstances, has for many years adjusted its methods in an effort to present a more optimistic picture than is actually the case.
Today it actually admits to this fact, a very revealing comment is given on the last link, “many economists believe that the numbers do not fully reflect the scale of job losses, since many are counted as employed but absent from work”. The Ministry then notes that this single factor would raise the unemployment rate by 1 percentage point.
Inflation in France (+ 0.1% per year) is the lowest in 4 years, the same in Italy (-0.4% per year). At the same time, the PPI in this country is the lowest since 2009 (-5.3% per year), similarly to the eurozone as a whole, where the PPI is -5.0%.
Retail sales in Japan in May grew by 2.1% per month after -9.9% in April, and annual performance improved only slightly, from -13.9% to -12.3%. New buildings in Japan are still weak:
The number of approved mortgage applications in UK in May is the lowest in 37,5 years, which is 8 times less than the peak of February.
Eurozone economic sentiment is improving more slowly than market expectations:
Same thing with business confidence in Spain and South Korea
A similar situation occurs in the US – the Chicago PMI index has risen, but not as much as experts expected:
Overall, the PMI index continues to improve in many countries (China, Japan, India, Russia, the eurozone, Britain, Canada, the US), where it has already reached a growth zone, but this is only a performance compared to the previous month.
But it seems more indicative of the Bank of Japan “Tankan” index in the 2nd quarter. the worst in 11 years in all directions: among large manufacturers, and large non-manufacturing firms and in small business:
Industrial production in South Korea fell by 6.7% per month in May after a similar downturn in April. The annual decline has increased to 9.6% – the highest since 2009, including in the manufacturing industry – to 9.8%. Worse still in Japan: – 8.4% per month and -25.9% per year (11-year minimum):
Summary: In fact, the generalization repeats what was said in the very first section of our Review: a natural recovery of the world economy by autumn is impossible, moreover, the basic structures, frameworks on which it was built, are being gradually destroyed.
The public is increasingly exposed to information that has long been known to specialists: the official statistical offices of almost all countries are not expert but political. They distort information to show a more optimistic picture than it actually is
In times of crisis, this misleads not only entrepreneurs and business managers, but also economic policy makers. With all the consequences.