6/5/20: S&P500 Earnings and Revenues Growth 1Q 2020

With early effects of COVID19 pandemic in:

Both charts via Factset.

6/5/20: Eurozone Composite PMI: Covid Horror Show

Final Eurozone Composite Output Index came in at 13.6 (Flash: 13.5, against March Final: 29.7). March was bad. April is worse. Final Eurozone Services Business Activity Index was at 12.0 (Flash: 11.7, March Final: 26.4), final Manufacturing PMI covered here: https://trueeconomics.blogspot.com/2020/05/4520-eurozone-manufacturing-pmis-crater.html.

1Q 2020 implied decline in Euro area GDP is at around 3.5%. 2Q 2020 start is now worse than 1Q 2020.

5/5/20: Sweden v Denmark: Covid19 experiences and outruns

For those interested, there's an ongoing debate about the benefits and costs of two different approaches to dealing with the Covid19 pandemic that are being contrasted in the case of Sweden (low level of restrictions) and Denmark (high level of restrictions). The two countries offer a decent 'natural experiment' data, due to their physical, cultural, historical and socio-economic proximities.

Peter Turchin dissects the evidence on the outcomes here: http://peterturchin.com/cliodynamica/a-tale-of-two-countries/ in a very readable and, yet, empirically rigorous analysis.

The chart above is the key, although not the only source of the insights. Lines represent a fitted model, while points represent actual data.

What is notable in the above (some of it is in Peter's post, some is not) are the following features of the data:

1. Death rates models in Denmark trail below those in Sweden, albeit the two converge into late April and reverse in early May. We do not know why, though Peter identifies one specific potential cause: slower and lower rate of testing in Sweden. Another potential cause can be the duration of treatment differences between the two countries. A third potential one, differences in vintage/strand of the virus. Etc...
2. Actual death rates uptick in Denmark around May 1 seem to be relative outliers to the Denmark data (we do not know why, nor do we know if these are going to become a 'new normal' or a 'new trend'). These outliers are certainly responsible for the trend lines reversals.
3. Actual death rates in Sweden are massively more volatile than those in Denmark. This volatility is most evident in April. This should imply serious differences in the accuracy/precision of both models, with Swedish model potentially down-weighing these upward outliers (this depends on the model used, of course).

The rest of conclusions are down to you, folks.

5/5/20: A simple view of Globalization: some thoughts

Globalization in  retreat chart via PIIE: https://www.piie.com/blogs/realtime-economic-issues-watch/pandemic-adds-momentum-deglobalization-trend

A neat visual summary of the extent of economic openness and globalization, via trade dimension alone. The caveats here are that this only captures trade in goods & services flows (see https://fredblog.stlouisfed.org/2017/05/are-you-open/), but ignores capital flows and the extent of globalization-induced complexity within modern economic systems.

We tend to think about globalization as a mass-type measurement, where the volume or the value of flows is what matters. Alas, things are more complex. Mass measurements should be properly adjusted for risks inherent in the flows and stocks, including geopolitical risks. Imagine a flow of goods from China to the U.S. as opposed to the same volume flow of the same goods from China to Ecuador. Geopolitical risks and uncertainties, as well as non-monetary costs/values involved in the two flows are distinct. Similarly, consider a set stock of capital from the U.S. domiciled in, say, the Netherlands as opposed to, say, in Russia. Once again, even when nominal values are identical, risk-adjusted values are distinct.

In simple terms, as neat as the above chart might be, it does not even begin to reflect the VUCA/risk-indicative nature and volumes of globalization-related flows and stocks.

5/5/20: A V-Shaped Recovery? Ireland post-Covid

My article for The Currency on the post-Covid19 recovery and labour markets lessons from the pst recessions: https://www.thecurrency.news/articles/16215/the-fiction-of-a-v-shaped-recovery-hides-the-weaknesses-in-irelands-labour-market.

Key takeaways:
"Trends in employment recovery post-major recessions are worrying and point to long-term damage to the life-cycle income of those currently entering the workforce, those experiencing cyclical (as opposed to pandemic-related) unemployment risks, as well as those who are entering the peak of their earnings growth. This means a range of three generations of younger workers are being adversely and permanently impacted.

"All of the millennials, the older sub-cohorts of the GenZ, and the lower-to-middle classes of the GenX are all in trouble. Older millennials and the entire GenX are also likely to face permanently lower pensions savings, especially since both cohorts have now been hit with two systemic crises, the 2008-2014 Great Recession and the 2020 Covid-19 pandemic.

"These generations are the core of modern Ireland’s population pyramid, and their fates represent the likely direction of our society’s and economy’s evolution in decades to come."

4/5/20: Eurozone Manufacturing PMIs Crater to Historic Lows

I do not commonly cover Eurozone PMIs, but April read-out is shocking. Truly, abysmally, shocking.

From Markit release:

• Final Eurozone Manufacturing PMI at 33.4 in April (Flash: 33.6, March Final: 44.5), so down 11.1 points m/m
• March was bad - at 44.5 well below the zero growth line of 50.0. April came in woefully bad. 
• Confidence sinks to record low and job losses mount
• This was "the lowest ever recorded by the series (which began in June 1997), surpassing readings seen during the depths of the global financial crisis". 

I have covered BRICS and Global Manufacturing PMIs for April here: https://trueeconomics.blogspot.com/2020/05/4520-bric-manufacturing-pmi-april.html. 

4/5/20: BRIC Manufacturing PMI: April

Coronavirus pandemic has finally bitted deeply into the BRICs economic activity data, with April 2020 manufacturing PMIs coming in sharp down:

Combined, GDP-weighted average Manufacturing PMI for Brazil, Russia, India and China came in at 41.4 in April 2020, down from 49.1 in 1Q 2020 and 51.2 in 4Q 2019. Sharp declines in Brazil Manufacturing PMI (down to 36.0 in April, compared to 50.6 in 1Q 2020), Russia (down from an already-recessionary 47.9 in 1Q 2020 to 31.3 in April), and India (collapsing from 53.9 in 1Q 2020 to 27.4 in April) were also not helped by the continued weakness in China (1Q 2020 PMI was 47.2, albeit March 2020 reading was an encouraging 50.1, down to 49.4 in April). So far, the first month of 2Q 2020 shows no positive indicators for Manufacturing sectors across all BRICs.

However, even with this woeful performance, BRICs managed to post higher PMI (slower decline in the economic activity) than the Global economy. Global Manufacturing PMI in April sunk to 39.8 from 48.4 in 1Q 2020 - a drop of 8.6 points, against BRIC Manufacturing PMI sinking from 49.1 to 41.4 - a drop of 7.8 points.

4/5/20: Updated Covid19 charts

Post-weekend updated charts on COVID19:

First off, global comparatives on incidence rates and death rates:

The above chart shows lack of convincing decline in the rate of detected new cases and deaths worldwide. In the last three days, global case numbers posted another 'local peak' reading of 93.328 cases on May 2, which marks a fifth 'local peak' in the overall time series. 'Local trough' of 65,944 cases on April 28 - much touted in the media as the evidence of the pandemic moderating - has now been followed by four consecutive days of increases through May 2, and the usual declines in cases on May 3 and 4th. May 4th counts were 78,657, which ranks 18th most severe increase in overall time history of the series.

U.S. vs EU27 comparatives:

To better capture the convergence in death rates between the EU and the U.S., here is a summary chart plotting the gap in death rates per 1 million of population between the two:

In simple terms, U.S. deaths rate per 1 million of population trailed the EU27 by 31.4 points back on April 8th. This gap has now closed to 11.6 points on April 27th. Note: we have to compare U.S. and EU27 figures referencing a 7-days gap in the timing of the major pandemic dynamics on-set in the U.S. vs EU27.

Finally, an update on data for Russia and BRICS:

The pattern established in recent weeks persists: Russia continues to post higher numbers (increasing) in the new detected cases, while Russia's death rate per confirmed case remains well below the BRIICS comparatives. Russia's death rate per 1 million population is statistically within the BRIICS range.

3/5/20: Financial Strength Across Emerging Markets

A somewhat simplified, but nonetheless telling heat map of financial strengths and vulnerabilities across emerging market/middle income economies via the Economist:

I have outlined European economies included (for some strange reason, the Baltics are not in the assessment, neither are Bulgaria, Moldova, etc). The top 9 as well as those ranked 11th, 12th and 15th are economies with no risk category at or below 'moderate'.  The bottom 15 have no risk category within a 'safety' zone.

Have fun with these...

3/5/20: Updated: The Scariest Chart in Economics

Updating one of the two 'Scariest Charts' in economics with the latest data - preliminary, through April 25, 2020:

This goes hand-in-hand with the earlier chart here: https://trueeconomics.blogspot.com/2020/05/3520-updated-shocking-wave-of-jobs.html. 

The speed and the depth of jobs destruction in the U.S. during the last two months has been beyond precedent. 

3/5/20: Updated: Shocking Wave of Jobs Destruction

Updating my previous post on the subject of jobs losses in the U.S. (https://trueeconomics.blogspot.com/2020/04/230420-shocking-wave-of-jobs.html):

We are now one week away from the unemployment claims filed in March-May 2020 exceeding the grand total of all jobs destroyed during all U.S. recessions between 1945 and 2019. That is, before actually exceeding the number of all jobs destroyed over all recessions over 75 years combined.

Current estimated non-farm payrolls are approximately back to 1997 levels, throwing payroll numbers some 23 years back within the span of just 2 months:

1/5/20: US vs EU COVID19 cases and deaths

Updating my data charts for EU27 comparatives to the U.S. in the number of cases, deaths and death rates: