Thursday, April 9, 2020

9/4/20: Updated: US vs EU28 Covid Cases and Deaths

US vs EU28 Covid cases and deaths update:

Note 1: adjusting for the onset of the Covid cases, US is lagging EU by 7 days. 
Note 2: Any comparatives between the U.S. and EU28 across the disease progression time line (with lags as noted in the Note 1 above) is hazardous, due to differences in methodologies of accounting for death rates earlier on in the pandemic as opposed to the current methodologies.

Currently, the U.S. is not on a trajectory/trend to catch up with the EU28 in terms of deaths within the next 10-12 days. Given the uncertainties in the rates of change in both new cases detection and death cases, there is no feasible accuracy in attempting to predict the rates of deaths convergence for the US at this point in time. That said, U.S. deaths have increased at an average rate of 16% daily in the last 5 days, while EU28 deaths increased at an average rate of 7% daily.

9/4/20: Ifo Eurozone Forecast Q1-Q3 2020: Covid19 Impacts

Germany's ifo Institute joint forecasts for Eurozone growth are out today. Bleak reading. The forecasts below assume that Covid-19 restrictions will be gradually lifted over the summer 2020.

Seasonally and working-day adjusted GDP growth:

From ifo forecast: "The economy in the euro area is expected to slide into a deep recession in the first half of 2020:

  • GDP growth is forecast to be -2% in Q1 and -10% in Q2, followed by a recovery in Q3 with +8%. 
  • Due to the lack of comparable events in the last decades and the unpredictable course of the pandemic, these estimates are subject to substantial uncertainty."
  • "Gross fixed capital formation is also certain to decline, with -2% in Q1 and -10% in Q2, due to supply disruptions, planning uncertainty and a preference for liquidity."
  • "Foreign demand is likely to contribute negatively to growth, as a result of the euro area’s exposure to recessive international trade and a struggling global economy."

Inflation environment:

Headwinds and risks: 

  • "A more unfavorable course of the pandemic would require longer and possibly stricter containment measures...
  • "Despite massive liquidity provision by governments and central banks, a prolonged downturn would then lead to liquidity strains in the economy. 
  • Increased debt levels associated with low income flows and asset devaluations are likely to lead to solvency issues for thinly capitalized corporations and private households.
  • An ensuing rise in loan defaults could in turn lead to problems in the banking sector." 
  • "A resurgence of the European debt crisis on a large scale thus constitutes a non-negligible risk to the forecast."

Wednesday, April 8, 2020

8/4/20: Ifo Institute Germany Forecast for 2020

A surprisingly 'positive' forecast for Germany from ifo Institute this morning:

While GDP contraction for 2020 looks sharp at -4.2 percent y/y, unemployment figures appear rather robust and employment levels seem to be only weakly impacted. Forecast for current account implies subdued global demand shocks. The swing in the fiscal position is roughly 6.5 percent of GDP, reflecting emergency supports measures. This is significant, and underpins shallower expected effects on employment and unemployment, as well as no deflationary dynamics in labour costs.

My view: Germany entered the pandemic crisis with already weak economy. 2019 growth at 0.6 percent was shockingly weak, with the economy skirting recession. Massive strength in the current account was reflective of weak domestic demand and the economy dependent on growth momentum globally. This momentum is now severely disrupted, and I do not expect robust global recovery outside domestic demand. In other words, my view is that worldwide exports are unlikely to rebound robustly in H2 2020, putting severe pressure on net exporting economies, like Germany and Italy.

So, whilst 4+ percent drop in full year GDP might be fine, I would expect closer to 5-5.5 percent decline (reflective of weaker prices), and much more pronounced impact on unemployment and employment levels.

Tuesday, April 7, 2020

6/4/20: Mexican and Canadian Perceptions of the U.S.: Leadership With a Negative Exponent

Here is an extraordinary snapshot of Canadian and Mexican perceptions of the U.S. via Pew Research:

Pew Research own summary is less damming than my inserts above suggest:

But think of this, for a second: these are two of the U.S. closest trading and cultural and social partners. And their positive perceptions of the U.S. are now at 6% and 11%. What, pray, position of leadership can the U.S. claim with this sort of the numbers coming from its closest neighbours?

Sunday, April 5, 2020

5/4/20: US vs EU Coronavirus Update

Here is a visual comparing incidences of (officially reported) and deaths from (officially reported) Novel Coronavirus 2019 or Covid-19 in the EU27 and the US:

Data through 04/04/2020

5/4/20: Effective Corporate Tax Rates in the U.S.: 1980-2019

Evolution of effective corporate tax rates in the U.S. from 1980 through 2019:

Source: Yardeni Research, with my annotations

Effective tax cuts rates rankings by Presidential Administration:
Bush Jr (largest cuts)
Bush Sr (second largest cuts)
Trump (third largest cuts)
Clinton (fourth largest cuts)
Obama (net change approximately zero)
Reagan (net change positive)

Taxes and tax burdens are complicated, folks...

Thursday, April 2, 2020

2/4/20: US Record in Covid Response To-Date

Much of the rhetoric coming out of the Washington on COVID19 pandemic is centred around the claims that the U.S. response to the pandemic has been adequately scaled up, with some claims even referencing allegedly 'highest rates of testing' in the world. Here are two charts putting the U.S. Covid pandemic responses to comparatives:

Now, most current data:

Not only the U.S. number of cases has now exceeded double that of Italy, but the U.S. death toll is currently on track to exceed Italy's massive death tool within 4 days, should the trend to-date persist.

'World class' track record this is...

2/4/20: COVID19 in three charts

#COVID2019 economy in three pics:

U.S. unemployment claims, week 2 of filings:

Irish unemployment claims, first month of filings:

 World GDP forecast after one month of Covid pandemic:
FUGLY! All around. 

Thursday, March 26, 2020

26/3/20: Why "Families First Coronavirus Response Act" Can't Fix America

I have written extensively about the fact that U.S. public has severely restricted access to healthcare and other basic services, primarily because of the illusion of insurance: the fact that many people in the U.S., even when covered pro-forma by insurance contracts, have no cash to cover the massive deductibles carried by these contracts.

Here is some recent (2018) evidence on the fact, via

"AARP's latest study tracking U.S. household savings is based on a “yes” or “no” response to the following question: “Does your household have an emergency savings account?” ... A majority of respondents answered "no," and even respondents who answered "yes" may not have a significant amount saved."

  • "...researchers note, "A broad interpretation of the question could count any plan for coping with an emergency, including borrowing from family and friends, as having an emergency savings account. Under this interpretation, even a household without savings in cash or a bank account may still answer 'yes' to the survey question."
  • "Fed data shows that 40% of US households would not be able to come up with $400 for an emergency expense," Deutsche Bank Securities chief economist Torsten Sløk notes.
Now, average deductible for U.S. healthcare insurance plan is now in excess of $1700 per person per annum. That is more than 4 times the $400 amount referenced in the Fed study.

Look at  higher earners in this:

A full quarter of those with household incomes in excess of $150,000 have no emergency savings. These families are  not covered by the Congressional aid passed yesterday. For those who are covered, the entire package will not cover average health insurance deductibles for two people in a household, let alone leave any money to help with rents, mortgages, utility and credit cards payments. 

Wednesday, March 25, 2020

25/3/20: More than €3bn: The Need for Stimulus in Ireland

"€3bn a month or more – the cost of offsetting the Covid-19 shock" my article for @thecurrency on the size of the fiscal/monetary stimulus required for Ireland. Available atr:

24/3/20: Q2 2020 S&P 500 Earnings Outlook: Not As Ugly as It Will Be

Per Factset March 23 report, "the aggregate earnings growth rate for Q2 2020 changed from slight year-over-year earnings growth on March 12 (+0.8%) to a slight year-over-year earnings decline on March 13 (-0.7%)." Note: back at the end of January 2020, the expectation was for y/y growth of 5.9 percent. Worse, "expectations for earnings growth for Q2 2020 have been falling over the past few months. On September 30, the estimated earnings growth rate for Q2 2020 was 8.0%. By December 31, the estimated earnings growth rate had fallen to 5.7%. Today, the estimated earnings decline is -3.9%."

"Four of the 11 sectors are now projected to report a year-over-year decrease in earnings for the second quarter: Energy (-68.4%), Consumer Discretionary (-14.4%), Industrials (-9.9%), and Financials (-7.4%)."

All of that, before the second half of March kicked in...

Monday, March 23, 2020

23/3/20: Private Consumption Gets the Virus. Heads to an ICU...

Via @bkollmeyer, Deutsche Bank's Research chart on discretionary spending across the global economy:

I have no access to the primary data on this, but if the chart is true, the global economy is 'borked'. 

One notable line here is for Ireland. Ireland's economy is heavily dependent on personal consumption expenditure. Here are the latest data:
    PC as % of
        PC as %          of GNI*
201958.7               NA

My estimate is that 2019 Personal Consumption to GNI* ratio was around 55.2%. If true, coupled with the above-cited DB research, Irish economy has taken a nosedive of around 4 percentage points for FY 2020 just on personal consumption side of economic activity. Investment and private sector production will be the other contributors to that decline.