It will be impossible to find any good news on business and economics this week in the face of unremitting gloom about the impact of COVID-19 which is rolling across economics large and small, smothering activity, jobs, and the future outlook.
Everywhere around the world, activity is slowing and public life coming to a halt.
So it was no wonder that the International Monetary Fund says it is clear that the global economy has now entered a recession and that the slowdown could be as bad or worse than the 2009 downturn.
The Fund’s Managing Director Kristalina Georgieva said on Friday in Washington the 189-nation lending agency was forecasting a recovery in 2021, saying it could be a “sizeable rebound.”
But she said this would only occur if nations succeed in containing the coronavirus and limiting the economic damage.
“A key concern about a long-lasting impact of the sudden stop of the world economy is the risk of a wave of bankruptcies and layoffs that not only can undermine the recovery but erode the fabric of our societies,” she told reporters at a news conference following a telephone conference with finance officials from the 24 nations that make up the IMF’s policy-setting panel.
She said the IMF is now updating its economic outlook now and it would be released in a few weeks, allowing the agency more time to assess the economic impacts of the virus.
The Fund’s Spring Meetings in Washington, along with those of the World Bank will be conducted online. The forecasts will be released, as usual, the week of the meetings, along with the global financial stability report.
Asked if the United States was now in recession, she noted that Federal Reserve Chairman Jerome Powell had said Thursday that America “ may well be in a recession.” Ms. Georgieva said she believed not only the US but many other advanced economies and a number of developing countries had already entered downturns.
Singapore gave an early clue last week of the looming slide.
Singapore’s economy contracted the most in a decade in the first quarter. GDP fell an annualised 10.6% in the first estimate of March quarter growth from the December quarter.
Compared with a year earlier, GDP was down 2.2% in the first quarter, versus a median market estimate of -1.4%. The Singapore government now expecting a sharp full-year contraction in the economy of between 1%-4%.
As the first Asian country to publish quarterly GDP data, Singapore foreshadows the pain the rest of the region can expect.
Thailand is already projecting its biggest economic contraction since the Asian financial crisis more than two decades ago, and several countries are bracing for the worst outcome in years.
The National Australia Banks now thinks China will see no growth at all in 2020 after an earlier estimate of between 3% and 4%.
The IMF’s Georgieva said lower-income countries were being hit hard by the spreading coronavirus, with 81 nations now seeking support from an IMF emergency financing program being used to provide aid.
Her contention about the global recession will be supported this week by data releases in various countries, starting with the surveys of manufacturing activity from China, then the rest of the world, followed by the surveys of service sector activity.
While an improvement is forecast in China from the record slump in February, it will not be very strong.
Australia will see the release of Reserve Bank Minutes for the meeting earlier this month, as well as final retail sales figures for February (as suggested by the preliminary report a fortnight ago), building approvals for February, house prices for March (which will not be pretty). Job vacancies data for the six months to February are likely to confirm the slide in the labour market).
Because the data releases this week are mostly historical (the Australian house price data is possibly the most up to date figures here, along with the manufacturing and service sector reports), it will be hard to get excited about February data.
The manufacturing sector reports from China – Tuesday, and Wednesday, and the rest of the world on Wednesday and the service sector reports on Friday will give us a better idea as to the size of the slump in the March quarter.
The China updates in particular will be scrutinised for signs of recovery amid reports of a rise in the number of industrial firms resuming work.
In the US, last week’s flash IHS Markit activity report revealed the steepest downturn since the global financial crisis in March, so markets will look to forthcoming data, including non-farm payrolls on Friday and the service sector activity report, also on Friday.
The labour force report for March will not pick up the surge in jobless claims which occurred after the end of the survey period in mid-March. Those figures will pop up in what looks like a terrible report in early May.
If anything this week’s reports will confirm the US economy was on the verge of a massive slide in mid-March. US car sales data for March on Wednesday will underline that
The flash Eurozone and UK manufacturing and service sector activity reports for March will show business activity crumbling across Europe, as expanding lockdowns and stricter anti-virus measures are implemented in response to a widening spread of COVID-19.
Eurozone data on employment and inflation tomorrow and Wednesday will show sharp falls as the economy slows.
In Asia, the March updates will come on the heels of February numbers which had indicated a much sharper contraction in Asian manufacturing output, primarily led by China.
Central banks in Singapore and India will decide on monetary policy, with the former bringing forward its semi-annual meeting from the usual April date.
Both central banks are widely expected to ease policy, joining the increasing number of countries launching significant monetary measures (Australia, US, UK, New Zealand for example).
Japan’s Tankan survey from the bank of Japan will show a sharp slide in activity and confidence among all types and sizes of business.
