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In addition to absorbing a virus shock through the China export demand and supply chain channels, Europe now has to absorb a domestic outbreak.
In addition to absorbing a virus shock through the China export demand and supply chain channels, Europe now has to absorb a domestic outbreak. Voluntary steps to prevent the spread of the coronavirus (“social distancing”) as well as official containment measures are likely to disrupt economic activity. We expect disruption beyond northern Italy, an area which accounts for about 5% of euro area GDP. A temporary economic shock similar in scale to Hong Kong’s when SARS struck in 2003 would only need to occur in 10% of the euro area for area-wide GDP to stagnate in H1 and take the zone to the verge of technical recession. It is a highly fluid situation, but this might be a best case outcome. [more]
The unique nature of the pandemic shock and the wide uncertainty surrounding it, meant there was no one historical playbook that fit easily. So inevitably there were going to be some surprises. In the event, there have been many. [more]
After shrugging off a historic plunge in April employment, market participants will likely need to digest further record-setting monthly declines in core CPI inflation as well as April retail sales and industrial production. [more]
It is now evident that the US economy is in the midst of the most severe contraction in the post-World War II era, one which could produce a record quarterly contraction in output in the second quarter and an unemployment rate above 17% in April. [more]
The US economy is experiencing unprecedented disruptions that have led to a sudden stop in activity. The result will be the most dramatic decline in GDP and sharpest rise in unemployment in the post-World War II period. [more]
There is no such thing as a free market anymore. All developed central banks have cut rates to zero and buying trillions of assets. Inflation is very low. A global liquidity trap may be in the making. [more]
We’ve witnessed an immense human tragedy as the covid-19 virus has spread around the globe. Amidst the awful numbers of people who have succumbed to the disease, we’re also now witnessing an incredibly painful economic downturn. [more]
The world economy has, to all intents and purposes, ground to a halt with widespread social distancing and lock-down measures resulting in the closure of restaurants, retail, travel, sporting events and many other business. [more]