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Soundless Depths, Glimmers of Light

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Global Economics – May 29, 2020


Definitive data on May are beginning to come in and are mostly pointing to no greater deterioration from April. Employment outside of North America has been holding up, but not consumer spending which is on a deep global decline. Cross-border trade and global industrial production are stuck in deep contraction, though here and there actual positives can be found in some of the data. We’ll start, however, with an assessment of April which of all the months of recorded economic history looks to have been the very worst ever.

The global economy

National activity index

How deep the great hole will prove is anybody’s guess. One indication from the United States suggests it may be much deeper than anyone thought. Following March’s minus 4.19 when shutdowns first got underway, the national activity index plunged to minus 16.74 during the full-virus impact of April. This is already 16 points below the minus 0.7 recession line and raises the question whether the Chicago Fed, which publishes this index, has worked out yet where the depression line should be.

Data for this index, which is a giant composite of 85 separate indexes, goes back to 1967 and no month was ever as bad as April, not even close. Back in 1974 the index skirted along the minus 5 line and nearly so again in 2008 and 2009. This report suggests that second-quarter forecasts may need to be marked down.

US National activity index

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