Thursday, July 9, 2020

8/7/20: On a Long-Enough Timeline, This Is Not Sustainable

Something will have to give, and on an increasingly more proximate timeline, although we have no idea when that timeline runs its course...

In basic terms, U.S. Bonds yields are only sustainable as long as:

  1. There remains a market-wide faith that the U.S. Government will not deflate itself out of the fiscal mess it has managed to run, virtually un-interrupted, since at least 1980 on; 
  2. There remains a regulatory coercion into the U.S. Government bonds being 'risk-free' capital 'instruments'; and
  3. There remains vast appetite for the U.S. dollar as the store of value instrument for everyone - from migrants and legitimate business people in the politically questionable jurisdictions to drug dealers.
Which puts a serious question mark over how long can the U.S. Treasury afford to escalate weaponization of the dollar.

Tuesday, July 7, 2020

7/7/20: Presidential 'Porkies' Series 4, Episode 99,732

So, we have a new Presidential Pearl of Dumbness: I have compiled some earlier summaries of the same here:

Accompanied by an academic institution's direct fact-checking:

And the actual facts, without the need for media interpreations:

Why are we focusing on countries with > 25,000 cases as in above, instead on looking at global (every country) comparatives? Because COVID19 pandemic is the large numbers case. Countries with fewer cases, especially cases per capita, are experiencing much more volatile dynamics in daily data, which can easily skew comparatives.

So here are the descriptive stats for the group of 51 countries, plus EU27 as a whole, that provide some decent comparatives for the U.S.:

Q1: Is the U.S.'s 'case-fatality rate', or the number of deaths per 1,000 of reported cases, the lowest in the world? 
A: No. Average case-fatality rate for 51 countries with highest number of total cases is 45.5. In the U.S. it is 44.34. Statistically, the U.S. is average in this metric. If we are to exclude the U.S. from the sample (to avoid 'double-counting') and exclude the UK and the EU27 - the set of countries with an earlier onset of the pandemic - the U.S. 'case-fatality rate' is above the average (36.5 is the upper bound for the confidence interval around the average). The U.S. 'case-fatality rate' ranks 20th highest in the group of 51 countries with more than 25,000 cases total.

Q2: Is U.S.'s death rate, or the number of deaths per 1 million of population, the lowest in the world?
A: No. Not by a mile. In fact, the U.S. death rate at 398.3 per 1 million is above the average for 51 countries (170.3) and above the upper boundary of the 95% confidence interval around the average (232.4).  The U.S. death rate' ranks 7th highest in the group of 51 countries with more than 25,000 cases total.

So, Mr. President is shooting the proverbial verbal porkies once again...  In fact, as the next post will show, the U.S. is a basket case when it comes to COVID19 outcomes even compared to the already basket case of the EU27. Alas, unlike the EU27, the U.S. does not have an excuse of being forced to deal with the pandemic in its earliest global development stages, when knowledge and better practices around the pandemic were not available to policymakers. Stay tuned... 

6/7/2020: Irish Services Sector Activity Index: May 2020

COVID19 impact on services sectors activity in Ireland, data through May 2020:

Huge adverse impact on the economy. Note precautionary purchasing effect on Retail sales in the difference between Wholesale & Retail index and Wholesale sub-index. And some recovery in May, compared to 1Q 2020. But overall, conditions are still dire. And we are not yet seeing the effects of consumer behavior changes on post-restrictions demand. That is still coming...

Forward industry view (ex-behavioral aspects) for June 2020, via Purchasing Managers Index:

6/7/20: Updated: 2Q 2020 Composite and Services PMIs for BRICs

As promised earlier (, here are the BRIC Services and Composite PMIs for 2Q 2020 with updated Global PMIs. Note: my charts show quarterly PMIs, derived from the Markit's monthly data.

Services sectors:

As the above shows, 2Q 2020, Services sector growth in India and Russia lagged Global sector activity.


India, Russia and Brazil manufacturing sector activity lagged Global activity in 2Q 2020. The same three BRIC economies also lagged Global Composite PMI development:

Per Markit release, here are the main developments in Global PMIs on monthly basis:

Manufacturing Index Summary:

There are robust forward expectations in all sectors of the Global PMIs, per above. Input prices are rising, but output prices continue to contract, albeit at shallower rates. Employment is still falling in both sectors. New business is still contracting, albeit at a slower rate, with exports declining sharper than domestic orders.

Overall, the numbers are still indicating ongoing contraction through June for BRICs and for the Global economy.

Looking at monthly PMIs, China and Brazil posted above 50.0 readings in June for Manufacturing, and China also posted a highly robust growth signal for Services. Brazil posted deeply contractionary June Services PMI reading, while Russia shows contraction ongoing (but at a shallower rate than in May) in both sectors. India posted continued decline in Manufacturing and a sharp continued contraction in Services. These numbers put a question mark over the prospect for a V-shaped recovery. April 2020 marks the trough of PMIs-signalled growth in the BRICs. We now have second month in a row of rising PMIs readings, but the indices are still below 50 line. On a quarterly basis, however, 1Q 2020 marks the BRICs recession in terms of PMIs signals (Composite country indices), with 2Q 2020 posting shallower rates of decline compounding 1Q 2020 drops.

Sunday, July 5, 2020

4/7/20: COVID19 Update: US vs EU27

Updating U.S. vs EU27 charts. Main conclusions in the charts, so click to enlarge these:

Death rates and deaths: key here, the U.S. is now within four-five days from completely overtaking the EU27 in the number of total fatalities, without even adjusting for the population size:

Of course, the U.S. already has higher death rates than the EU27, once we adjust for population differences.

And U.S. cases are roaring ahead. In fact, the U.S. leads the world in new cases additions, having overtaken this week its own abysmal record peak levels:

Daily death counts are not falling in the U.S. on-trend, despite what you hear from people focused solely on week-on-week comparatives:

The above two charts paint a painfully ugly picture for the U.S. pandemic developments:

  1. EU27 are relaxing their COVID19 restrictions against the backdrop of new cases and deaths counts being below the levels when the restrictions were introduced. The U.S. is doing the same against the backdrop of severely elevated and rising new cases, well ahead of the numbers that prompted original restrictions introductions. The U.S. is also relaxing restrictions at the time when daily deaths counts are running well above those that warranted introduction of restrictions.
  2. Notably, the U.S. deaths cases counts are of questionable quality at higher frequency analysis. What does this mean? U.S. local authorities report deaths with severe lags, especially for deaths that do not take place in the hospitals. Even hospitals have significant lags in reporting deaths data. This means that we cannot use daily frequency data for true insights into death rates dynamics. Looking at the data from mid-June through July 4, daily death rates are statistically static, not declining. 
  3. U.S. death rates per capita are currently more than 30 percent higher than those in the EU27. This is a cumulative gap, and it is growing so far. As of July 4th data (this is ECDC data, so covers July 3), U.S. death rate per 1 million of population was 32 percent above that of the EU27. A week before, the same rate was 29 percent higher in the U.S. and two weeks ago, the gap was 23 percent. The U.S. moved six percentage points within two weeks.
  4. U.S. public compliance with social distancing and other safety measures has been an unmitigated disaster. The reason is more than the lack of coordination between the local authorities. The U.S. has politicized masks and social distancing, thanks to Mr. Trump and his supporters. The U.S. has also politicized safety behavior. The same is not the case in Europe, although there are reports of lax compliance with safety norms in many parts of the continent. 
All of the above strongly implies that the U.S. is now well-set to witness a new and stronger wave of pandemic contagion. This is happening in the middle of the summer and with weather conditions that should be favoring reduction in contagion, as opposed to its acceleration. 

4/7/20: COVID19 Update: World Cases and Deaths

No over-the-peak, yet for world cases:

Deaths are persistently high, and trending up, and are too far lagged to reflect that last 10 days of massive global uplifts in new cases. 7-days average of deaths is at 4,625, which is 0.62 standard deviations higher than the average, and is slightly above the 60-days average of 4,590:

Death rates and new cases stats for select countries:

50 most impacted (by case numbers) countries in alphabetical order:

Meanwhile, 4th of July crowds are everywhere in the US of A, and weekend crowds are also reported - with no masks - across Europe. Stay safe, everyone! Wear masks!

Saturday, July 4, 2020

4/7/20: ifo Institute Eurozone Growth Outlook

Germany's ifo Institute issued a new growth outlook for Eurozone economy:

  • "Overall, the eurozone economy is likely to see a sharp recession in the first half of 2020. 
  • "GDP already contracted in Q1 by 3.6%. 
  • "In Q2, the decline of GDP is forecast to be historic (-12.3%). 
  • "On the other hand, the recovery is likely to be quick supported by massive stimuli in some eurozone countries with GDP growth reaching +8.3% in Q3 and +2.8% in Q4 2020. 
  • "Yet, the GDP level at the end of last year will not be reached by the end of this year."

In 1Q 2020:

  • GDP fell by 3.6%. 
  • "The greatest negative contribution came from private consumption. 
  • "... firms hold back their investments due to liquidity issues and uncertainty on future developments. 
  • "... external demand was weak and caused exports to plunge. 
  • "Economic activity went down by 5.3% (Italy), 5.3% (France) and 5.2% (Spain). Germany was affected less severely with GDP contracting by 2.2%. 
Dynamics into June:
  • "The European Commission’s economic sentiment indicator fell from 94 points in March further to 65 points in April, rebounded somewhat in May and increased strongly in June up to almost 76 points."
  • "The IHS Markit composite purchasing manager’s index reflects a similar development as it dropped from 30 points in March to as low as 14 points in April. In May it recovered to 32 and in June again up to 48 points." Note: Markit PMIs below 50 indicate continued, compounded contraction, as a rise in index from 32 to 48 between May and June means that contraction was weaker in June.
Summary of forecasts:

Headwinds to the above forecast:
  • "Currently, economic projections are made in face of high epidemiological uncertainty. ... This forecast assumes that a second COVID-19 wave will be prevented. The occurrence of a second wave, with containment measures to being introduced again, is thus a downward risk for our forecast. 
  • "Another uncertainty for this forecast is that we are still learning about consumer reactions to containment measures and it is still unclear, how quickly consumption behavior will normalize.
  • "In addition, the liquidity situation of many companies is deteriorating rapidly. An unexpectedly high number of insolvencies might disturb the economic recovery and cause bigger than expected problems for the banking sector. Currently, in many countries new regulations for postponing insolvencies were introduced, which means that these will become evident later than usual, probably not before autumn. 
  • "Also, numerous private households might run into solvency issues due to lower income and a worsening labour market situation."
In contrast, here are the IMF latest forecasts for the euro area:

Markit PMIs:

3/7/20: Labor Market COVID19ed

I have been running a regular update on my 'America's Scariest Charts' covering labor markets developments (see most recent one here: These charts rely heavily on two data sets: Non-Farm Payrolls data (monthly frequency), and initial unemployment claims (weekly frequency). I ignored for now two other data series:

  1. Average duration of unemployment: this is, of course, rising, but from low levels, as the COVID19 crisis is still relatively young; and
  2. Continued unemployment insurance claims: these data have been also proximate to the initial unemployment claims through the period of February-May.
Now, with two months of some jobs recovery, it is worth looking at (2) above. So here they are: continued unemployment claims charts:

Let us start with history:

There is no scaling in the above chart, just the numbers of people claiming unemployment insurance on continued basis. Which is telling: in recessions, these rise; in recoveries they fall. You can see that the lowest unemployment claims tend to happen some months before the onset of the subsequent recession. And recoveries take long. Of course, in the 1970s, there were fewer people in the labour force and, therefore, the absolute numbers of the unemployed were also lower.

Which means, it is worth rescaling each episode of rising and falling unemployment claims to the pre-recession levels ('norm') and to the recession peaks, taking into the account how long does it take unemployment claims accumulated during the recession to drop back to the levels of pre-recession claims.

So, methodology. I define 'normal' unemployment claims level as being the lowest level attained in the 12 weeks preceding each recession. This is set as an index of 100 for every recession. We look at the period of 6 weeks prior to the onset of the recession to identify the starting level of recession in terms of unemployment levels (these are weeks -6 through 1 on the X-axis). We then look at subsequent weeks (non-negative values on the X-axis) and plot index of unemployment claims (current unemployment claims normalized to the 'normal' level) through the recession and into the recovery, mapping these until one of the two events occurs:

  1. Either the index returns back to 100 - meaning unemployment claims finally are restored to the level of the pre-recession levels or the 'normal'; or
  2. In cases where this does not happen, until the onset of the next recession.

First, let us do this for all recessions since 1967 (when the data starts) through the end of 2019 - ignoring for now the COVID19 period.

Lots of interesting stuff in the above.

  • 2008-2009 Great Recession was long - longer than any other recession - in terms of labor markets recovery to 'normal' levels of unemployment claims. It was also sharp - second sharpest on record - in terms of the mass of unemployment claims at the peak of the recession. 
  • Legacy of the 1990-1991 recession was also painfully long, but shallower on the impact side (peak levels of unemployment claims). 
  • Epic 1973-1975 recession was horrific: it had a long lasting impact on unemployment claims and, in fact, it never got the point of returning unemployment claims levels back to the pre-recession 'normal'. 
  • We normally think of the 2001 recession as being 'technical' - caused just by the gyrations in the stock markets, aka the bubble burst. But in reality it too was pretty long in terms of its impact on the unemployed and it was pretty sharp as well.

And so on... but now, time to bring in the COVID19 pandemic. Let us start by just plotting it with the rest of the data. Boom!

The COVID19 pandemic made so many people claim unemployment insurance - on continued basis, not just one-off first time claims that anyone can file - that you can no longer meaningfully consider the rest of the recessions in comparison. In data analysis, we say that COVID19 pandemic is an influential outlier - it distorts our analysis of all other recessions. In this case, it is useful to use logarithmic scale to visualize the data. So here it is:

Even with log-transform, as above, the COVID19 crisis is off-the charts! No one has ever seen anything like this. Which we know.

The recovery from the pandemic has been sharp as well (steeper slope than in other recessions), but both charts above highlight the fact that whilst the U.S. economy is restoring some jobs during May-June re-opening period, the process of restoring these jobs is slow. Unlike what you hear from the White House and the Republican Party and its media, we are not in a 'tremendous recovery' and there is no 'roaring growth'. There is a mountain of pain that is being chipped away. At a current rate of 'chipping away', it can take the jobs markets some 10 months to come back to the pre-COVID19 'normal'. But that assumes that there will be no permanent or long-term jobs losses from the pandemic and the aftermath of the pandemic. It also assumes that the second wave of COVID19 infections that the U.S. is currently experiencing is not going to lead to such losses of jobs, and will not result in return to April-May levels of restrictions, and will not trigger a third wave of pandemic in Autumn. All three 'ands' must hold to get to that 10 months recovery. 

Stay tuned, I will be updating this chart as we go.

Friday, July 3, 2020

3/7/20: Services & Composite PMIs Q2 2020: BRIC

Note: charts below are not updated for full 2Q 2020 data on Global Services and Composite PMIs, which are yet to be reported for June and thus cover April-May period only. I will update these later.

Starting with Services sector activity:

BRIC Services index fell from a deeply recessionary 44.9 reading for 1Q 2020 to 40.9 in 2Q 2020, signalling accelerated rate of contraction in the sector across the four emerging markets economies. 1Q 2020 is now the second lowest quarter of index performance on the record, with 2Q 2020 coming in as the worst quarter on the record.

China was the strongest performer, with 2Q 2020 index at 52.6, four quarters high, and statistically in a relatively robust growth territory. Historically, this reading is consistent with GDP growth of 4-4.5 percent.

Russia recorded the second strongest reading, albeit at sharply recessionary 32.0 in 2Q 2020, down from the already recessionary 47.7 in 1Q 2020. 2Q 2020 is the lowest reading on record for Russian Services sectors. So being second wins no prizes.

Brazil Services PMI fell from a sharply recessionary 45.9 in 1Q 2020 to an even more depressing 30.3 in 2Q 2020. Needless to say, 2Q 2020 is the worst reading in Brazil Services PMI history.

India Services PMI has been signalling an outright collapse of economic activity in 2Q 2020, having fallen to 17.2 against 1Q 2020 reading of 54.1. The economy is literally paralysed.

In the entire history of BRICs PMIs, there has been only one other instance of two consecutive sub-50 readings - in 4Q 2008 and 1Q 2009, when the two-quarters average of the index was 47.7. Current index reading has !Q-2Q 2020 average of 42.6.

Given the above and the Manufacturing PMIs (covered here:, BRICs Composite Indices (note: I am using Markit data and relative GDP weights for each economy) have been woeful as well.

Brazil Composite average for 1Q 2020 was at 46.9. This fell to 31.8 in 2Q 2020. A recession in 1Q 2020 has accelerated dramatically into 2Q 2020 across all sectors of the economy.

Russia Composite average in 2Q 2020 was at 32.6, marginally better than that of Brazil, and well below already-recessionary reading of 47.7 in 1Q 2020. This, too, signals accelerating collapse of the economy.

India Composite index was in the expansionary territory at 54.8 in 1Q 2020 and it fell to an abysmally low 19.9 in 2Q 2020, indicating that the country economy came to a standstill in April-June. This is the lowest Composite index reading on record for any BRIC economy.

China Composite index fell from 52.6 in 4Q 2019 to a contractionary 42.0 in 1Q 2020, before recovering back to 52.6 in 2Q 2020. If treated symmetrically, this means that the Chinese economy did not fully recover to pre-crisis growth rates in 2Q 2020, but has made some progress on the path to recovery. There are multiple caveats that apply to this analysis, however, so treat it as purely directionally-indicative, as opposed to a measure of actual magnitudes.

As noted earlier, I will update these charts in subsequent posts, once we have Global PMIs reproted.

3/7/20: ECB Jumping the Proverbial Shark?

ECB's money-printing press has been running overtime these weeks. So let's put the Euro area central banks' monetary policy shenanigans into perspective, comparing them to the Global Financial Crisis (GFC) related measures, the Euro area sovereign debt crisis and the subsequent painful recovery:

Good thing: ECB has deployed COVID19 response at scale and fast. Bad thing: it is highly uncertain how much growth all of this activism is going to sustain. From 2000 through 1Q 2020, there is zero (statistically) relationship between current GDP growth (nominal) and ECB assets accumulation in the same year and in prior year:

Even ignoring statistical significance, the relationship itself is not positive, especially in the lagged data. In other words, there is absolutely no evidence of causality from ECB asset purchases to higher economic growth. While reasons for this results are complex (and not really a matter for this post), there are some serious questions to be asked as to how much tangible growth is being sustained by the Central Bank's activism. On the other side of the same argument, if we assume that the ECB purchases of assets are effective at sustaining growth in the Euro area economy, then we must have some serious questions as to what the Euro area economy is capable of producing in terms of GDP growth without such interventions.

In simple terms: we are damned if we do, and damned if we do not:

  • Either monetary activism is not effective at sustaining growth, or
  • If monetary activism is effective, then the state of the economic institutions overall is so dire, it remains comatose even with extraordinary supports from Frankfurt.

Neither is a pleasant conclusion. And there is not a third alternative.

Just in case you need a reality check on how poor Euro area's growth has been, here is a summary:

Thursday, July 2, 2020

2/7/20: COVID19 Update: US vs EU27

A quick update of key charts for USA vs EU27 comparatives for COVID19:

First up: deaths per 1 million. U.S. continues to tear away from the EU27 already unenviable record:

The basket case of American 'public health' system is shining across the board: in numbers roaring above the past records:

And in deaths counts staying well above those in Europe:

At this stage, it is plain evident that the U.S. healthcare system is not fit for purpose.

Unless its purpose is to bankrupt those getting ill, in which it excels. U.S. delinquencies on all consumer credit and leases were up in 1Q 2020 some 11.28 percent year-on-year even before COVID19 pandemic hit. As the bills mount, and healthcare bills come poring for the unfortunate households caught up in the pandemic, things are going to get much worse.

No matter how you spin the data above, the problem is clearly not restricted to the lack of White House leadership alone. The U.S. has mismanaged response to the pandemic at

  • The Federal level (lack of coherent policies and guidelines, delayed responses, delayed interventions and completely backward messaging/signalling by the President), but 
  • Also at the states' level. Even in the states that stepped up to the plate earlier in the pandemic (e.g. California), a rush to relax restrictions, coupled with the lack of political will to impose stricter requirements on use of masks and the speed of opening up have resulted in a renewed surge in COVID19 cases.
As the result, the U.S. is now fully comparable to the less advanced, less wealthy countries, such as Brazil, than to the more advanced healthcare systems and economies of the EU27. As Noah Smith put it in his Bloomberg column last week, titled "Coronavirus Brings American Decline Out in the Open", if, on foot of collapsing U.S. institutions, exposed by the COVID19 crisis, international "capital begins to abandon the U.S. and the dollar in large amounts, the currency

will crash, ... large-scale unrest would undoubtedly result and -- in the worst-case scenario -- the U.S. could collapse like Venezuela. This is an outcome to be avoided at all costs. But it’s an outcome that is no longer out of the realm of possibility, thanks to the complacency, arrogance and misplaced priorities of U.S. leaders and the deep and bitter divisions among U.S. voters. If the U.S. goes from rich, world-straddling colossus to floundering dysfunctional developing nation in just a few decades, it will be one of the most spectacular instances of civilizational decline in world history."

Steep price to pay for decades of incompetence. 

2/7/20: America's Scariest Charts Updated

Some updates from the US Labour Markets to our America's Scariest Charts series today.

First, headline official Non-Farm Payrolls data for the month of June 2020 is out today. Here is the visual:

Total Non-Farm Payrolls dropped during the COVID19 pandemic to the crisis-period low of 130,303,000 in April 2020. This marks a drop of 22,160,000 on pre-crisis high - a decline of 14.53%, the sharpest drop on record for any recession. Since then, the payrolls improved in May and again in June. Payrolls rose 2,699,000 in May and by 4,800,000 in June, prompting the White House (and the army of its trolls) to herald an 'unprecedented' 'tremendous' recovery. However:
  • Despite these gains, current employment levels remain 14,661,000 below pre-COVID19 highs.  
  • Relative to the pre-COVID19 trend, current payrolls are 15,398,000 below where they would have been were the pre-crisis trends to remain place. 
Hardly 'tremendous' success so far.

Summary of comparatives of the current recession to prior recessions:

Now, next in the set of our America's Scariest Charts: initial unemployment claims 9also released today). The table above already shows the latest print for these series - for the week ending June 27, 2020, at 1,445,481 new claims filed. This was virtually unchanged on the revised final estimate for the week ending June 20, 2020 that came in at 1,460,056. New claims have basically stabilized from the week of May 30th through latest. 

The six-months moving sum of all initial unemployment claims filings is now at a massive 47.477,907. This number, of course, are reflective of claims filed. And it does not reflect expired claims or people moving from unemployment to employment. Hence, it is useful in only highlighting the relative magnitude of the current jobs crisis controlling for duration.

Prior to the COVID19 pandemic, there has been only one instance of initial unemployment claims exceeding 1 million count in any given week - during the week of January 9, 1982, when there were 1,073,500 new claims filed. Which means that last week's print - although well below peak COVID19 filings - still stands almost 35% above the worst weekly unemployment claims filing in pre-COVID19 history. 

So here is the overall 'recovery' to-date:

You can call it 'magnificent' or 'tremendous' or you can call it 'ugly'. I guess your perspective will depend on your party affiliations and the membership in the 1% vs 99% clubs.