Economic Highlights

GDP contracted by 5.8% in March from February, with the Q1 data showing a fall of 2% from Q4’19. No sector of the economy was spared, and things are only going to look worse in April. For the whole of 2020, Investec Economics forecasts a GDP decline of 8.9%, followed by a recovery of 8.4% in 2021, therefore still not recovering the lost ground.

Retail Sales for April fell 16.4%, somewhat below estimates, which, admittedly, were always going to be hard to get right. Core CPI fell 0.4%, the largest month-on-month decline since the inception of this data series in 1957. This is now running at 1.4% y/y. Headline CPI, a more volatile measure, is down to +0.3%, and might well turn negative. The jury remains out on long-term inflationary trends, but the debate is heating up.

Germany’s economy fell into recession, thanks to a 2.2% fall in output in Q1 and a negative revision to Q4’19 data (from zero to -0.1%). Even so, it was much better than the performance of its EU peers, with both government expenditure and construction contributing to the relative resilience.

Something of a muted bounce in activity in April. Industrial production rose 3.9% y/y (vs -1.1% in March). Retail sales were -7.5% y/y (vs -15.8%). Fixed Asset Investment data was -10.3% y/y (vs -16.1%). The surveyed urban jobless rate came in at 6.0% (vs 5.9%). It was noted that the Chinese economy “hasn’t returned to normal levels”, and that there are “pent-up demand effects” in the data improvement.