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.

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: https://www.pewresearch.org/fact-tank/2020/04/06/the-u-s-in-one-word-canadians-say-trump-mexicans-point-to-money-and-work/.

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?

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...

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. 

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 https://www.axios.com/newsletters/axios-markets-3c6856b0-31c2-485d-a8be-0f0b0dae267c.html/:

"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. 

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: https://www.thecurrency.news/articles/12547/e3bn-a-month-or-more-the-cost-of-offsetting-the-covid-19-shock.

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...

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     modified     total    demand	PC as %          of GNI*
1995-1999	58.8	57.6
2000-2007	54.7	55.2
2007	54.1	56.7
2008-2014	62.8	63.8
2015-2018	59.4	55.4
2019	58.7	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.

$5.9 trillion and counting: the scale of Monetary Easing

Updating my previous post: https://trueeconomics.blogspot.com/2020/03/20320-46-trillion-and-counting-scale-of.html listing all measures monetary authorities around the world have unleashed in response to the Covid19 crisis:

• 23/3/2020 Federal Reserve Bank of the U.S.: 

1. Commitment to continue asset purchasing program “in the amounts needed to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy”. Basically, an open-ended pledge, with no USD amount. This does not move the needle on its prior commitment if USD 700 billion in purchasing, for 2020. But it does expand the program, should the crisis continue unabated, and probably allows for bringing the committed purchases forward
2. The Fed also will be buying corporate bonds, crucially the investment-grade securities in primary and secondary markets and through exchange-traded funds. Again, this has been pre-committed to, but 'primary' markets operations are something that is truly unprecedented.
3. An unspecified lending program for Main Street businesses and the Term Asset-Backed Loan Facility implemented during the financial crisis
4. There will be a program worth $300 billion “supporting the flow of credit” to employers, consumers and businesses 
5. Two facilities set up to provide credit to large employers
6. Issuance of asset-backed securities backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration and certain other assets
7. Expanding Commercial Paper Funding Facility. The program now will include “high-quality, tax-exempt commercial paper” and the pricing will be reduced.
8. Lower the interest rate on its repo operations to 0% from 0.1%.
9. My estimate of the 1H 2020 net impact of new measures is in the region of USD200-400 billion.

• 22/3/2020 Chancellor Angela Merkel’s government plans to increase borrowing up to EUR 150 billion in 2020 and pass a EUR 156 billion supplementary budget. Germany is also planning to set up a bailout fund for critical industries of about EUR 500 billion. While the measures are fiscal in nature, they require monetary policy supports to sustain low borrowing costs and demand for these securities.

These measures moves the needle for global measures from USD4.6 trillion to USD 5.9 trillion.

22/3/20: COVID2019 in Numbers

Updating numbers for Corona Virus infections and related deaths:

Next up, comparing Italy and U.S. numbers in terms of their dynamics from the start of the infection detections in each country (date 30) to today:

Note, while the U.S. infections dynamics have overtaken Italy already, U.S. death rates remain well below those in Italy. This is due to a range of factors, none of which are particularly satisfactory for the U.S. healthcare system assessment:

1. Italian demographics and deaths cases suggest that Italian patients were more likely to die from the disease earlier on after the detection than the U.S. patients.
2. Higher population density and concentration of the virus cases in Italy mean greater strain on healthcare resources in specific locations in Italy than in the U.S.
3. rates of detection and treatment are most likely much higher in Italy than in the U.S. due to more severe restrictions in the U.S. in accessing healthcare. 

I covered some of these earlier here: https://trueeconomics.blogspot.com/2020/03/15320-acute-beds-and-hospital-beds.html. But here is an added kicker not mentioned in the linked post: the U.S. is now facing a massive wave of ongoing layoffs. As workers lose their jobs, they also lose access to health insurance (the continuity coverage program, COBRA, is excruciatingly expensive).