Period: 25 – 31 July 2020
Top news story: The main news of the week was GDP data for the 2nd quarter of the world’s leading economies. The result was very low, leading to a drop in oil prices, an increase in gold prices and general feeling of pessimism.
Germany’s GDP fell by 10,1% per quarter and 11,7% per year. Both figures are the lowest in 50 years of observation:
ВВП Франции -13.8% в квартал и -19.0% в год – 70-летние антирекорды:
Italy’s GDP -12,4% per quarter and -17,3% per year – is the lowest in 60 years of observation. Spain’s GDP -18,5% per quarter and -22,1% per year.
For the Euro Area as a whole -12.5% per quarter and -15.0% per year:
US GDP is -8,2% per quarter, and the method of calculating them is not clear. Taking their nominal GDP and dividing it by a deflator, we have -9,5% – exactly the same as the annual recession.
This is the worst trend since 1932, and it should be recalled that the figures are given in annual terms, that is to say, the quarter is multiplied by 4.
Mexico’s GDP is -17,3% per quarter and -18,9% per year.
Industrial production in Japan in June grew by 2,7% per month and fell by 17,7% per year. Housing starts and construction orders remain far in the negative:
In May, leading indicators in Japan moved just slightly from the 11-year low, coincident indicators approached it even close, and all sectors of the economy fell to record lows:
CPI Australia in 2 sq. fell by 1,9% per quarter (the lowest value for all 70 years of observation) and 0,3% per year (the trough since 1997). Adjusted for volatile components, they are also at record lows:
In Germany in July, for the first time since 2016, there was deflation, a similar pattern in Italy.
According to the Conference Board, American consumer sentiment in July has sharply deteriorated due to new COVID-19 cases – the current estimate is improving, but expectations have plummeted.
The University of Michigan offers the same version, with expectations returning to the 6-year minimum:
The Euro Area is getting softer, but consumer sentiment is also deteriorating:
In the US, the number of primary applications for unemployment benefits has been increasing for two consecutive weeks, and the number of repeat cases has begun to rise:
Redbook’s weekly monitoring of retail sales in the US shows a deterioration at the end of July. The annual downturn is getting worse:
US Federal Reserve left monetary policy unchanged, but extended incentives for at least 3 more months.
Summary. According to our assumptions in previous reviews, the recovery from quarantine activities (which were not actually completed) was incomplete and the crisis is returning. It should be noted that the US economy is shrinking by more than 30% to the size of China (whose GDP is about $16 trillion). Of course, the third and fourth quarters may be better, but the scale of events suggests that the current crisis may be larger than the crisis of 1930-32.
We recall that the Michael Khazin Economic Research Foundation estimates that the outcome of the current crisis in the US and Western Europe will be about one and a half times higher than in the early 1930s.