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Our best guess is that business surveys, such as the PMIs, understated falls in activity in April and we suspect that the next batch of surveys, released as early as next week, will do so again in May. Despite the risk that the surveys are misrepresenting …
14th May 2020
Numerous lending facilities have been either launched, revived, or expanded Many aim to provide liquidity to financial institutions and non-financial firms But the line between liquidity operations and monetary policy is sometimes blurred Traditionally, …
7th May 2020
The impact of the lockdowns on the ability of statisticians to collect price data means that measures of inflation will be less accurate than normal. However, this will probably have little impact on economic policy because these problems are dwarfed by …
6th May 2020
The coronavirus will leave in its wake a sharp rise in public sector debt. Low interest rates suggest that many governments will be able to live with this, rather than having to resort to austerity, default or inflating the debt away. But they would still …
5th May 2020
Manufacturing PMIs for April fell sharply, but the way the surveys are constructed means that conditions may be even worse than the headline figures suggest. Indeed, the sub-components of the surveys are consistent with global industrial output …
4th May 2020
Unlike in previous downturns, residential property has not been the root cause this time. Even so, house prices will not escape this recession unscathed. If policy support proves effective, if lockdowns hamper property sales, and if demand rebounds later …
29th April 2020
While we expect to see a sharp rebound in global activity once coronavirus-related restrictions are eased, GDP in most economies will still be below its pre-crisis path even after two or three years. (See here .) In this Update , we discuss which …
Whilst the CPB world trade data showed another small drop in February, with lockdowns taking effect across much of the world in March, we expect much sharper falls in the coming months. In total, we expect the coronavirus to knock around a fifth off world …
24th April 2020
Table of Key Forecasts Global Overview – The disruption relating to the coronavirus is set to cause the steepest fall in global GDP since the Second World War. We are forecasting a 5½% contraction this year, far bigger than the 0.5% fall seen during the …
23rd April 2020
As expected, after a dreadful month in March, the Flash PMIs for advanced economies got a whole lot uglier in April. While we suspect that they are not picking up the full scale of the declines in activity, the PMIs should become more useful when it comes …
Plans to ease containment measures have raised fears of a second wave of coronavirus to come. In some ways, the world economy would be better prepared to deal with it. But the development of testing and tracking will be crucial in determining the extent …
22nd April 2020
Many countries have now announced wage-subsidy programmes to prevent widespread layoffs. Household incomes will still be severely squeezed by pay cuts. Nonetheless, limiting the rise in unemployment will help countries to get up and running again once the …
20th April 2020
The early evidence suggests that household consumption in OECD economies may not have collapsed by as much as many fear in March. But as the boost from food stockpiling fades, overall consumer spending will plummet in Q2. Using our new (downloadable) …
17th April 2020
The IMF published the first chapter of its Global Financial Stability Report on Tuesday, in which it argued that the COVID-19 crisis poses “a very serious threat to the stability of the global financial system”. In this Update , we outline five …
16th April 2020
Different countries will adopt different approaches to ending shutdowns but a common theme is likely to be that restrictions are phased out gradually by sector and, perhaps, region. The extent to which this is accompanied by new mass testing programmes …
15th April 2020
There is no doubting that governments have generally pulled out all the stops in announcing big fiscal stimulus programmes. But announcing them is one thing; quickly getting the money to where it is needed is quite another. There is a risk that logistical …
14th April 2020
A host of global indicators are showing the devastating effects of the coronavirus and related containment measures on the world economy. The global services PMI (see Chart 1) dropped to its lowest level on record in March and such qualitative surveys are …
9th April 2020
Rates slashed to rock bottom and generosity of lending enhanced Massive asset purchases are intended to boost liquidity and will be reduced in time But radical sustained support seems possible, carrying future inflation risks for some What a difference a …
8th April 2020
The upcoming GDP figures for developed markets will give an indication of the damage the coronavirus was already doing by the end of the first quarter. However, even at the best of times, there are question marks over how well GDP measures activity and …
7th April 2020
We have developed a 45-sector spreadsheet model that allows clients to design their own shutdown scenarios and assess the impact on GDP in 20 major economies. You can access it by selecting the xlsx option from the dropdown in the download button above. …
3rd April 2020
The economic recovery underway in China gives some useful pointers to what lies ahead for the rest of the world. An initial increase in activity can happen rapidly once lockdown measures are eased. But this will soon run into constraints resulting from …
2nd April 2020
March’s small rise in the global manufacturing PMI was driven entirely by a rebound in China and masked sharp declines elsewhere. The survey already points to falls in global production, but it is probably understating the extent of current weakness and …
1st April 2020
The world is heading for the sharpest and deepest global slowdown since WW2. Assuming that the virus is brought under control within a few months, the subsequent rise in world GDP should also be sharp. However, it could still take years for demand to …
31st March 2020
We have condensed this edition of the Inflation Watch to focus only on timely data and coronavirus effects. While the coronavirus crisis will have both upward and downward effects on prices, we expect the net impact to be significantly disinflationary, …
Unlike in previous downturns, services are likely to underperform industrial sectors this time around. Consumer-facing services, such as leisure and hospitality, are suffering most already. As the shock ripples through supply chains, business services …
27th March 2020
In this Update , we answer some key questions about the fiscal stimulus underway in advanced economies. In short, government deficits are set to soar, probably rising by more than after the financial crisis. This is not an immediate problem, given that …
26th March 2020
The latest trade figures from the CPB revealed only a small fall in world trade volumes in January, but export orders from the PMI surveys have since slumped. With the coronavirus plunging the world economy into recession, global trade looks set to fall …
25th March 2020
The March Flash PMIs for advanced economies were dreadful. The composite PMI for DMs plummeted to a level just shy of its all-time low. With the lockdowns only getting underway, worse will come in April. Today’s batch of PMIs all but confirm that advanced …
24th March 2020
Central banks are already facilitating fiscal packages in various ways. But with the fiscal costs of the coronavirus likely to rise much further, policymakers might consider explicitly financing them with a permanent expansion of central bank money – the …
Financial conditions in advanced economies are now almost as tight as they were in 2009. So far, this has been the result of an economic shock rather than strains within the financial system itself and hence financial conditions are posing less of an …
23rd March 2020
The immediate effects of the coronavirus on the global economy are becoming increasingly clear and point to a sharp fall in output across the world. Recession looms. The effects over the longer term are less obvious. The most likely outcome is that …
19th March 2020
What were downside risks to the global economy just a few days ago are fast morphing into our central scenario. We now expect global GDP to fall by about 1% this year, which would be twice the decline seen in 2009. And while the rebound will hopefully be …
18th March 2020
With central banks already having used up most of their ammunition, we are now reliant on governments to prevent the global recession from turning into something even worse. We are optimistic that the lesson learnt from the global financial crisis was to …
Travel and tourism is clearly one of the hardest hit sectors in the coronavirus crisis. In a realistic scenario where travel and tourism dropped by 50% for four or five months, annual global GDP growth would be reduced by about 0.7 percentage points. …
17th March 2020
There is much more that central banks could do to ease any strains that appear in financial markets. But with interest rates now more or less back to their effective lower bound in the US, euro-zone, Japan and the UK, monetary policy appears to be …
16th March 2020
The real-time economic and market disruption from the coronavirus means that much of the backward-looking data released during the past month offers little insight into current developments in the world economy. Accordingly, this publication will now …
13th March 2020
School closures are one of the main ways in which government attempts to manage the spread of the coronavirus will dent economic activity. While parents can work around the closures to some extent, there is nonetheless likely to be a fairly sizeable hit …
Some countries have managed to control the new coronavirus without large-scale quarantines or economic shutdowns. But they have achieved this by preventing the virus from spreading within the community in the first place. The only places that have so far …
11th March 2020
One of the few crumbs of comfort amid the turmoil in financial markets over recent days is that the global banking system does not appear to be in imminent danger. This reduces the risk that a severe global downturn morphs into a full-blown financial …
While the drop in oil prices will push inflation down in the near term, the bigger disinflationary risk could stem from the effect of the coronavirus on economic activity. Indeed, we said after the global financial crisis that the world was now one …
10th March 2020
While falling oil prices have historically been deemed a net positive for global demand, there are several reasons to think that the latest slump will only add to the immediate headwinds facing the world economy. In the past, economists have argued that …
9th March 2020
Our current assumption is that the virus-related disruption is not severe enough to prompt a widespread business debt crisis. But if the virus triggers a sharper drop in profits or a bigger rise in borrowing costs than we envisage, then these pockets of …
6th March 2020
Given the uncertainty about how the coronavirus will evolve, and how governments will respond, it is easy to envisage ways in which the hit to global GDP will be larger than the 1%-pt we have now built into our forecasts. However, in these more …
4th March 2020
Today’s G7 statement about likely measures to tackle the effects of the coronavirus fell short of hopes of a major coordinated policy response. This raises the risk that central banks will disappoint markets’ expectations in the months ahead. The …
3rd March 2020
It is now likely that the central banks of major developed markets (DMs) will follow Australia in loosening monetary policy to help their economies weather the impact of the coronavirus. But there is a limit to what this can achieve; more effective will …
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
February’s slump in the global manufacturing PMI to its lowest level since May 2009 confirms that the nascent industrial recovery has been thrown into reverse. The hit to activity has been largely confined to China so far, but there are already signs of …
Despite the past week’s equity market rout, financial conditions in DMs generally remain accommodative. It’s still early days, but the sell-off would need to go much further before hampering GDP growth. Coronavirus fears have sparked the third-largest …
28th February 2020
While medical advances put the world in a better position than in the past to limit the health consequences of a global pandemic, globalisation and a bigger services sector mean that, other things equal, a pandemic is likely to cause greater short-term …
Falls in equity prices and bond yields so far this week reflect fears that coronavirus cases outside China will mark the start of a wider outbreak that deals a blow to the world economy. For now, we envisage a moderate hit to global GDP growth of 0.5ppts …
26th February 2020
