The economy is set to rebound strongly in the current quarter after its 12% slump in Q2, even if there is no further increase in GDP in August and September. Indeed, some of the high frequency data suggest that economic activity is almost back to its pre-crisis level already. (See Chart 1.) However, these data can be misleading, and we suspect that overall activity remains between 5% and 10% below its pre-crisis level. Even if there is no further wave of coronavirus, much of the economy will not get back to normal for a long time. And the recent worrying rise in new coronavirus cases in Spain, and more modest increases elsewhere, raises the spectre of a second wave of confinement measures which could easily tip the economy back into recession.
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