Alastair Winter
Thought Leader,
MarketExpress.in
Global Sharing Platform
is done even if the pace and scale of the recovery around the globe are far from clear.The UK is one of the few countries to report monthly GDP and next week should record further month on month growth in November. By the end of January the first returns on Q4 should still be positive in most economies, albeit held back by renewed restrictions that will also impact the current quarter. The lifting and reimposing of restrictions is undermining the usefulness of the Purchasing Managers Surveys (PMIs).
The Manufacturing PMIs were actually unusually strong in many countries because conditions were much more favourable than earlier in the year, but were more subdued in ASEAN countries, which have clamped down again. A more accurate indicator is Industrial Production which has now been a negative year on year for 22 successive months in the Euro Area (23 in Germany), 17 in the UK, 15 in the US and 14 in Japan. In the Euro Area and UK, the Services PMIs also perked up in December without signalling overall expansion, unlike in the US and China where there may turn out to have been too much activity, and they seem set to plunge lower again in January. Nevertheless, Retail Sales have continue to grow in China and advanced economies, if anything boosted by those locked down buying all manner of stuff online, with the important exception of clothing.
The relative buoyancy of Retail Sales raises the question as to just how much pent-up consumer demand is waiting to flood into travel, catering, entertainment and…er….fashion. Huge net repayments of Consumer Credit throughout 2020 in the US and UK suggests that plenty of money is potentially available, but will spending patterns really return to where they before the pandemic and, if so, how soon? The latest round of Consumer Confidence numbers are not immediately encouraging and are surely being held back by people worrying about their jobs.
So far, the official headline Unemployment rates have held up quite well but the December Non-Farm Payrolls reported an unepected and ‘unseasonal’ loss of 140,000 jobs (the ADP Private Sector reported a loss of 123,000). Looking at the underlying data, it seems almost all those losing their jobs are women, long-term unemployment is increasing and people are giving up working altogether in record numbers. Less surprising but no less unsettling, is that the job losses were concentrated in the leisure and hospitality sectors.
Even more unsettling is the global phenomenon of fewer job vacancies: with the UK and Spain reporting the biggest falls and even Japan is not faring much better (Figure). It is going to be very difficult to assess the economic damage from the pandemic until the Unemployment numbers settle, which unfortunately and inevitably they will do at lower levels.
