Tuesday, September 22, 2020

22/9/20: COVID19 Update: German Economic Growth Forecasts 2020-2022


Germany's ifo Institute published their forecasts for 2020-2022 today. These represent an improvement on Summer forecasts, but continue to show big impact of the COVID19 pandemic lasting beyond 2021:

Private consumption is expected to be 0.82 percentage points below 2019 at the end of 2022, and barely in line (0.78 percentage points above) with 2018 levels. GDP is forecast to reach 1.34 percentage points above 2019 levels in 2022. Employment levels are projected to stay below 2019 levels through most of 2022, and unemployment numbers are expected to stay above their 2019 levels through the entire 2022. General Government deficits will remain in 2020, 2021 and 2022.

Using pre-2020 trend growth, German economy would have been 1.66 to 1.85 percentage points ahead of the GDP levels now forecast for 2022, which means that under the current forecasts, we can expect recovery to the pre-COVID19 trend GDP by the end of 2024. This assumes ca 1.7 percentage points growth over 2023-2024 horizon, which may be quite optimistic, given prior trend growth rates of 0.975% pa. 

ifo forecasts note the state of economic uncertainty: "The degree of uncertainty in our forecasts is enormous because nobody knows how the coronavirus pandemic will develop, whether there will be a hard Brexit after all, and whether the trade wars will be resolved". Which, of course, highlights the environment of VUCA that we are living in.

Friday, September 18, 2020

18/9/20: COVID19 Update: Countries with more than 100,000 cases

Some descriptive stats and relative rankings for countries with the largest number of cases:

In terms of relative and population-adjusted performance metrics:

  • The U.S. ranks 6th highest in the pandemic extent (number of positive cases per 1 million of population). The EU27 as a whole ranks 23rd highest.
  • The U.S. ranks 8th highest in terms of deaths per capita (number of deaths per 1 million of population). The EU 27 ranks 14th highest.
  • The U.S. ranks 18th highest in terms of mortality rates (deaths per case). The EU 27 ranks 7th highest. 
  • The U.S. accounts for just 4% of the world's population, but the country accounts for 24% of all global cases, and 22% of all deaths. In comparison, the EU27 accounts for 6% of the world's population, 8% of all cases, and 16% of all deaths.
  • U.S. country relative positioning across three metrics for comparison (32 sum score) is worse than that of the EU (44 sum score), Italy (35 sum score), Israel (64 sum score), Germany (70 sum score), France (37 sum score), and Canada (51 sum score).
  • U.S. country relative positioning across three metrics for comparison is better than that of Spain (23 sum score) and the UK (29 sum score).

18/9/20: COVID19 Update: U.S. vs EU27


Updating charts for the U.S. and EU27:

  • Deaths per capita: the U.S. has overtaken the EU27 since May 18, and the trend for the U.S. continues to be worse than that for the EU27.
  • EU27 death rate per capita has effectively flattened-out at around 303-308 per 1 million prior to August 2, 2020, but is rising once again since then (321.7 currently).
  • U.S. deaths per capita continue to increase (604.1 currently).
  • Overall counts of deaths in the U.S. are now above the EU27, since July 12, with current excess gap at +55,593 up from +34,553 a month ago and +6,187 two months ago.
  • Currently, adjusted for population differences, the U.S. has 92,384 more deaths than the EU27. 
  • Adjusted for later onset of the pandemic in the U.S., America's death toll from COVID19 is to-date is 98,726 higher than that of the EU27.

Big news is that, as stated in prior updates, the EU is now officially in a second wave of pandemic:

Although deaths in the EU remain below prior wave peak, these are rising and, accounting for lags in new cases, are likely to continue to climb:

Meanwhile, the U.S. numbers are starting to show some indicative signs of re-acceleration. If confirmed, the U.S. will also join the EU27 in entering a second wave of the pandemic.

For now, the EU27 continues to exhibit better cumulative case counts and deaths counts than the U.S., in absolute terms and adjusted for population differences and vintage of the pandemic onset.

On a cumulated basis to-date, the U.S. public health system is now responsible for ca 92-99,000 excess deaths compared to the EU27 - deaths that would have been preventable were the U.S. policymakers to give a damn about public health system in America. This should be criminal, but sadly, it appears to be normal. 

18/9/20: COVID19 Update: Worldwide Cases and Deaths


Global cases are now once again on the rise and hitting new historical highs:

Daily deaths are running at elevated levels and showing signs of some uptick on the recent local lows:

As the result, both new cases counts and deaths growth rates are now positive and rising:

In summary, the pandemic continues to rage across the globe, without any moderation. Significantly, there is now a full-blown second wave underway in Europe (more on this later). 

Thursday, September 17, 2020

17/9/20: Exploding errors: COVID19 and VUCA world of economic growth forecasts


Just as I covered the latest changes in Eurozone growth indicators (https://trueeconomics.blogspot.com/2020/09/17920-eurocoin-leading-growth-indicator.html), it is worth noting the absolutely massive explosion in forecast errors triggered by the VUCA environment around COVID19 pandemic.

My past and current students know that I am a big fan of looking at risk analysis frameworks from the point of view of their incompleteness, as they exclude environments of deeper uncertainty, complexity and ambiguity in which we live in the real world. Well, here is a good illustration:

You can see an absolute explosion in the error term for growth forecasts vs actual outrun in the three quarters of 2020 so far. The errors are off-the-scale compared to what we witnessed in prior recessions/crises. 

This highlights the fact that during periods of elevated deeper uncertainty, any and all forecasting models run into the technical problem of risk (probabilities and impact assessments) not being representative of the true underlying environment with which we are forced to work.  

17/9/20: Eurocoin Leading Growth Indicator 3Q 2020


Eurocoin, CEPR & Banca d'Italia leading growth indicator for Euro Area economy is pointing to renewed weaknesses in the Eurozone economy in August, falling to its lowest levels in the COVID19 pandemic period:

As the chart above shows, Eurocoin fell from -0.5 in July to -0.64 in August, its lowest reading since June 2009. The forecast September indicator is at -0.30. Through August, we now have five consecutive months of sub-zero readings. Based on July-August data and September forecast, we are looking at a GDP contraction of 3.5 percentage points in 3Q 2020. This is mapped out in the chart below:

As the chart above shows, average annual growth rate in the Eurozone for 2020 is now sitting at -6,33 percent, far worse than the previous low of -0.575 in 2009. In quarterly readings, we now have two actual and one forecast quarters of 2020 all performing worse than the peak of the Global Financial Crisis / Great Recession contraction (see green entry in the chart above).

As before the COVID19 crisis, Eeurozone economy is performing woefully. On no time horizon did Euro area manage to achieve average annual growth of 2% (chart above).

17/9/20: Stonks are Getting Balmier than in the Dot.Com Heat

Via Liz Ann Sonders @LizAnnSonders of Charles Schwab & Co., Inc. a neat chart summarizing the madness of the King Market these days:

Yeah, right: PE ratio is heading for dot.com madness levels, PEG ratio (price earnings to growth ratio or growth-adjusted PE ratio) is now vastly above the dot.com era peak, and EPS is closer to the Global Financial Crisis era lows. 

What can possibly go wrong, Robinhooders, when a mafia don gifts you some chips to wager at his casino?

Monday, September 14, 2020

13/9/20: COVID19 Update: Nordics

 I have not updated the controversial comparatives between the Nordics (ex-Sweden) and Sweden in terms of COVID19 pandemic figures for some time now. For those of you who are out of the loop in this controversy, 

  • Sweden imposed weak restrictions (basically none) on mobility and work environments in the wake of the pandemic, pursuing the strategy of 'herd immunity';
  • Other Nordics imposed severe crack downs on mobility and social and work environments in response to COVID19 pandemic.
There has been a lot of controversy as to the effectiveness of the lack thereof of the Swedish strategy.

So here are the key data trends and points:

Key takeaways from the above:
  • As of September 12, Sweden has the total number of 89,377 cases. Nordics ex-Sweden, normalized to the Swedish population size had 35,277 cases, or 39.5% of the total number of Swedish cases. So to-date, Sweden has experienced significantly greater exposure to the virus than its Nordic countries counterparts.
  • As of September 12, Sweden has the total number of 5,829 deaths. Nordics ex-Sweden, normalized to the Swedish population size had 2,188 cases, or 37.5% of the total number of Swedish deaths. Sweden also experienced much higher death counts from the pandemic than its Nordic countries counterparts.
  • Notably, per first chart above, since 26-27th of August, Nordic ex-Sweden have experienced a rather substantial re-acceleration in new cases, in line with the rest of the EU27 (see more on this here: https://trueeconomics.blogspot.com/2020/09/12920-covid19-update-us-vs-eu27.html). Sweden is only appearing to show signs of such re-acceleration starting with the end of the first week of September.
  • The above change in trends for new cases is yet to translate into change in trends in deaths: in the last 7 days, average daily new deaths for Nordics ex-Sweden, adjusting for population differences, was 0.83. The same number fo Sweden was 1.57. In the prior 14 days, the averages were reversed at 1.034 and 0.571, respectively.
Watch the new wave developing in days ahead... 

Sunday, September 13, 2020

13/9/20: COVID19 Update: Russia and BRIICS

 Updating my long-overdue charts for Coronavirus pandemic in Russia:

One worrying trend is the uptick in smoothed data for new cases in the last two weeks and a smaller corresponding increase in new deaths, as noted in the chart above.

Looking at the controversial mortality rates:

To highlight the above, consider the following differences between some key countries/country groups:

Note: China does not enter the comparatives, since it has, officially, less than 100,000 cases to-date.

12/9/20: COVID19 Update: Worldwide Cases and Deaths

The global COVID19 pandemic is refusing to go away. Day 247 and the dynamics of new cases and daily deaths remain as worrying as ever, just as the public and the politicians have largely settled into the strange 'ignore and forget' pattern of thinking about the threats.

Here are the daily new cases and deaths charts:

Key takeaways from the above two charts are:
  1. There is no amelioration in the pandemic dynamics in terms of new cases: we are still at the peak levels of contagion worldwide.
  2. Earlier hopes for decline in new cases worldwide has now been replaced by a re-acceleration in the new cases arrivals.
  3. Historical average daily new cases is 115,366. Last 30 days average is 263,940 new cases per day and last 7 days average is 267,832. The pandemic is getting worse, not better.
  4. Historical average daily deaths is 3,710. In the last 30 days, the average has been 5,603 and in the last seven days, 5,863. 
  5. The peak of daily deaths occurred back in mid-April owing to a number of factors, that can be considered as exceptional. These include heavy concentration of COVID19 cases, lack of medical experience in treating COVID19 cases, demographic biases in early wave of COVID19 cases, and so on. On-trend, the peak was around 7,000 daily deaths.
  6. Since the peak, daily deaths counts did not decay beyond the local trough around the end of May - a trough that was less than 50 percent lower than the peak (not an impressive moderation for a pandemic). The trough was set at around 4,050 daily deaths.
  7. Since then, however, matters worsened once again, with a new local peak reached at around 6,000 cases in the last week of July. Deaths counts have been bouncing around 5,600-5,700 daily cases since then.
These worrying numbers are confirmed by the dynamics - the rates of change in the series:

As you can see from the chart above, the data is exhibiting a risk of rapid re-acceleration in the pandemic dynamics in terms of both, new case numbers and deaths. Of course, the data is volatile, so it is hard to tell if the new re-acceleration of growth rates to 15.8 and 24.4 percent for new cases and deaths, respectively, is going to hold. Nonetheless, nominally, we are no longer witnessing the second derivative (acceleration) moderating. Which means we are at a risk of rising severity of the already horrific trend. 

Here is a handy summary table of comparative growth rates:

Please note, these are growth rates that are already smoothed by using 7 days average! 

Fir numbers geeks amongst us, here is a summary table of comparatives for 33 countries, plus the EU27, that have more than 100,000 cases reported. Last time I updated these figures on August 30, there were 30 countries in this club.

Due to deterioration in the global pandemic conditions, EU27 is now ranked as an 'average' (statistically) territory. The U.S. remains 'worse than average'. 

The same table by aggregating countries by some internationally-recognized groupings:

And a descriptive statistics table for all countries with > 100,000 cases:

In summary, the pandemic is not going away. We are months before the start of the 'normal' flu season in the Northern Hemisphere, when temperatures outside force much of the activity - work, social, personal - indoors and into closer proximity to others. More inclement weather is coming to the largest concentrations of people on Earth, not only in Europe (already living through the second wave of the pandemic) and North America (still struggling with the first wave), but also to Asia-Pacific and the likes of India (which already outpaced Brazil to the second place in terms of infections after the World Series leader, the US of A). 

The brighter news on the horizon, currently, are the news relating to the vaccines development. But these vaccines are unlikely to hit mass markets any time soon, at least not before the October-November flu season onset. 

12/9/20: COVID19 Update: U.S. vs EU27

After some pause, the latest update for the U.S. vs EU27 Covid19 pandemic comparatives: 

  • In summary: the basket case of the U.S. is getting somewhat challenged by the second wave sweeping across Europe, and we are still months away from the traditional flu season.
So here are the details:

As it says on the 'tin': new cases continue to climb in the U.S., albeit at slower pace of daily new additions than before. EU is showing acceleration in new cases growth, but for now, the rate of new cases additions in Europe is still well-behind that of the U.S. 

In terms of deaths per capita, the U.S. continues to pull away from Europe:

Key takeaways from the above graph are:
  • The U.S. has a vastly higher death rate per 1 million population than the EU27 rate: current death rate per 1 million of population in the U.S. is 590.0 against the EU27's 318.3. Ouch!
  • Put differently, current U.S. death rate per capita is 85 percent above that for the EU27. Going for the double within the next month, based on the trend.
  • This means that overall counts of deaths in the U.S. are now above the EU27, since July 12. And things are getting worse: current excess gap is at +52,015 up from +29,428 a month ago and +1,841 two months ago.
  • Adjusted for population differences, the U.S. has 88,868 more deaths (call them the excess deaths) than the EU27. Adjusted for the later onset of the pandemic and population differences, America's death toll from COVID19 is to-date is 98,786 higher than that of the EU27. Time to blame Obama and China, or, if that fails, Putin.
Daily new case counts:

Daily new deaths counts:

Key takeaways from the last two charts:
  • Europe has now entered a full-fledged second wave of contagion.
  • This contagion is more widely distributed across countries, which makes it less 'visible' compared to the first wave. 
  • Numbers counts in Europe are now at the prior wave's peaks, and massively above the levels that triggered original shutdowns and quarantines. 
  • All of the above means that the deaths counts are rising, albeit off low levels, and will continue to rise.
  • Meanwhile, in the (misnamed) Land of the Buffalo (yeah, Bison ain't Buffalo, folks) things are not getting better. They are just getting worse slower. 
  • U.S. deaths are running at daily rates well-above the first cycle trough, although it is too early to call this a 'second wave', yet. New cases remain very high, albeit significantly off the first wave peak.
A handy comparative table:

Meanwhile, the stock markets are roaring like a drunken Boris in a sauna around hour 2 of steaming.

Saturday, September 12, 2020

12/9/20: Deep Impact of COVID19 on economic sectors supply side


An interesting research from McKinsey on a range of COVID19 pandemic impacts across a broader range of industries -- from traditional to advanced (advanced industries group includes automotive, aerospace, advanced electronics, and machinery players):

Source: https://www.mckinsey.com/industries/advanced-electronics/our-insights/organizing-for-speed-in-advanced-industries

Notably, intangible areas of impact appear to have been largely positive for all sectors, but tangible, productivity-related areas show deterioration. Worryingly, there is a significant - by sector and by sample average - adverse shock to productivity and volatility of business outcomes.