Facts vs Opinions
20 April 2020
Wishful thinking or not, investors remain eager to latch on to any fragment of good news, and so global equity markets continue to make progress
5 min read
20 Apr 2020
Economic Highlights
Welcome to our Economic Highlights, bringing you market updates from across the UK, US, Europe and China, as well as the FTSE weekly winners and losers.
The economic effects of COVID-19 continue to be revealed, and make for pretty grim reading. Last week’s major release was from China, which reported a 6.8% fall in first quarter GDP compared to 2019. That’s the first negative reading since the current data series started in 1992. Nobody is immune from this virus (with the possible exception of North Korea!). Retail Sales for the quarter were down 15.8% versus -20.5% in the first two months, and so a glimmer of recovery, although still worse than consensus forecasts. Industrial Production pared its annual decline to 1.1% in March after having been down as much as 13.5% earlier in the year. However, there remain concerns about who is going to buy the output with the rest of the world going into lockdown. The central bank continues to respond with further incremental interest rate cuts.
Meanwhile in the US, the Weekly Jobless Claims number edged back a touch to “just” 5.25 million. That’s 22 million signing on in just four weeks. Such figures are unheard of in such a short period. The total payroll for the non-farm sector numbers 152 million, meaning that close to 15% of workers have just become unemployed. The job losses in the last month almost wipe out all the jobs created since the financial crisis, which is a sobering thought. Lagging economic data remains almost useless in helping us to project current and future conditions. Purchasing Manager surveys, usually the most timely series, were not really designed to cope with the sort of volatility in demand and supply that we are now witnessing.
US Weekly Jobless Claims continue to give us the best snapshot of current coronavirus effects, with another 6.6 million joining the lists last week. That’s 17 million in 3 weeks – more than 10% of the workforce. We might get some more clues as to the effect on corporate health this week when Q1 results start to filter through. China’s trade data for March came out on Sunday night, with both Exports (-3.5% y/y) and Imports (+2.4%) doing better than forecast. However, exports could well deteriorate further in the weeks ahead as demand from the rest of the world decreases, and imports may well have been inflated by food purchases under the US/China trade deal.
Source: FactSet
Source: FactSet