9/8/20: Ireland PMIs and Economic Activity Dynamics for August

Ireland's PMIs are signalling a cautious recovery in the growth dynamics across three sectors, with growth still underperforming historical averages.

Irish Services Sector PMI rose to a respectable 52.4 in August from 51.9 in July, with the latest index reading sitting 38.5 points above April 2020 COVID-19 pandemic lows. However, statistically, the index remains below historical average of 55.0 and the median of 56.8. In other words, second month post-contraction phase of the pandemic, Irish services sectors are still struggling to restore growth (not levels) in activity consistent with a robust recovery.

Irish Manufacturing Sector PMI fell to 52.3 in August from July's 57.3 reading. The series are generally more subdued than Services PMI, which means that August reading is statistically indistinguishable from the historical average of 51.5 and is bang-on the median of 52.31. Manufacturing activity swung 16.3 points between COVID19 trough and August reading. Overall, Manufacturing growth seems to have fallen off the post-COVID19 high.

Irish official Composite (two sectors) PMI is currently at 54.0 which is statistically at the historically median rate of growth. The series are too short to talk about averages and historical comparatives in any serious terms. 

Irish Construction Sector PMI (not included in the official Composite PMI) came in at 52.3 in August, up from 51.9 in July and 48.7 points above the COVID19 trough in April. Current reading is statistically above the historical average, but identical to the historical median. This suggests that much of the rebound can be down to seasonal and cyclical volatility, as opposed to thee genuine recovery. 

Here is a summary chart of the three sectors dynamics:

I compute my own GVA-shares-weighted 3-sectors Activity Index, using all three sectoral PMIs reported by IHS Markit. The 3-Sectors Activity Index currently sits at 52.4, down from 54.1 in July and up 30.1 points on COVID19 trough. The current growth in economic activity in Ireland is statistically below historical average, and historical median. And it has moderated from July high, suggesting that the economy is still struggling to recover levels of activity lost to the COVID19 pandemic.

8/92020: BRIC: Composite economic activity indicators

 Based on Markit's Composite PMIs, here are the BRIC economies composite economic activity indicators for 3Q 2020 to-date (July-August). 

Please, note: Manufacturing PMIs for BRIC economies were covered here: https://trueeconomics.blogspot.com/2020/09/8920-bric-manufacturing-pmis.html, and Services PMIs were covered here: https://trueeconomics.blogspot.com/2020/09/8920-bric-services-pmis.html. 

• Brazil Composite PMI for 3Q 2020 currently sits at 50.6, barely above the zero-growth line of 50.0 in statistical terms. This represents a major improvement in growth momentum compared to an outright depressionary reading of 31.8 in 2Q 2020 and a swing of 18.8 points - a respectable reversal of momentum, although not a signal of an appreciable recovery from the recession.
• Russia Composite PMI for 3Q 2020 is at blistering 57.1, suggesting a genuine recovery, albeit one-sided, driven by services sector rebound. COVID19 pandemic low was recorded in 2Q 2020 at abysmal 32.6, implying latest swing from the trough of massive 24.5 points. This does appear to be consistent with a robust recovery momentum, albeit with some caveats. This is the highest reading for any quarter since 3Q 2006 and the third highest reading on record.
• China Composite PMI is at 54.8 so far through 3Q 2020, an improvement on growth-signalling 52.6 reading in 2Q 2020 and up respectable 12.8 points on recession trough in 1Q 2020.
• India Composite PMI managed to rocket to a still-recessionary 41.6 in 3Q 2020 to-date, up on the recession trough of 19.9 in 2Q 2020 - a swing of 21.7 points. Still, the economy remains in a pronounced recession and 3Q 2020 so far is showing signs of exacerbated contraction building on 2Q 2020 collapse in activity.

For BRIC economies as a whole, the chart next shows GDP-weighted and GDP-shares weighted BRIC Indices of activity, compared to Global Composite PMIs:

Overall, BRIC economies growth momentum is still subdued and largely performing worse than the Global Composite PMI indicator.

8/9/20: BRIC: Services PMIs

Services sector activity as reflected by PMIs from the BRIC economies is now available for August, so here are the top numbers: 

In terms of actual readings, and do recall, quarterly PMIs referenced above are averages over three months period, so 3Q 2020 data is only covering July-August 2020.

• Brazil Services PMI was nowhere near the insane reading posted by the country Manufacturing PMI (see post here: https://trueeconomics.blogspot.com/2020/09/8920-bric-manufacturing-pmis.html). Services index came in at 46.0 for the period of July-August (3Q 2020 to-date), up on disastrously low 30.3 in 2Q 2020, but still well below 50.0 line of zero growth. Reading PMIs, this means that the sector activity continued to contract in 3Q 2020 so far, on top of the already sharp contraction experienced in 1Q 2020 and 2Q 2020.
• Having set no records in Manufacturing, Russia Services PMI came out with a massive and seriously surprising print to the upside in August. As the result, 3Q 2020 to-date Services PMI rose to 58.4 for the highest reading since 2Q 2009. As massive as the print is, it is pretty 'normal' for volatile Russian services data. Still, the recovery it signals is sharp, as 2Q 2020 COVID19 trough was at a misery-inducing 32.0. The implied trough-to-peak swing is jaw-dropping 26.4 points.
• China Services PMI rose in the first two months of 3Q 2020 to 54.1 from already expansionary 52.6 in 2Q 2020. Trough-to-peak COVID19 swing is now at 13.7 points, and the latest reading is the highest since 4Q 2010, when the index stood at 54.2.
• India Services sectors are still in sharp contraction. Recall: in 2Q 2020, India Services PMI crashed, smashed, collapsed, melted down, or whatever else you might call, falling from 54.1 in 1Q 2020 to 17.2 in 2Q 2020, the lowest reading for any BRIC economy in any sector at any time. So far, in 3Q 2020, the index is running at 38.0, which implies that India's services sectors continue to contract from already reduced activity in prior quarter. In the light of this super-sharp recessionary dynamic, it is impossible to reconcile Manufacturing sector PMI and Services sector PMI in this economy.

Overall, BRIC Services Activity Index - a measure I compute using a range of data inputs, including Markit's PMIs - came in 49.9 in 3Q 2020 (to-date), an improvement on 2Q 2020 reading of 40.4 and above 1Q reading of 44.9. Nonetheless, across the four largest EM economies, Services activity continues to contract for the third quarter in a row, nominally, and it is standing still statistically. In this, BRIC economies are distinct from the Global Services PMI indicator, which rose from 35.6 in 2Q 2020 to 51.3 in 3Q 2020 (to-date). 

Stay tuned for BRIC Composite PMIs next.

8/9/20: BRIC: Manufacturing PMIs

Updating BRIC Manufacturing PMIs - with some delay (sorry, start of the academic year):

 These are quarter averages, with July-August for 2020. And wee have:

• A mad print for Brazil. In the last four months, Brazil Manufacturing PMI went from 38.3 in May to 51.6 in June, 58.2 in July and a totally incredible 64.7 in August. As PMIs are indicators of month-on-month activity changes, and not comparable year-on-year, all we know is that there is a massive boom in the sector from the lows of the COVID19 pandemic recession. But we do not know if we are close to pre-COVID19 levels or close to the pre-COVID19 trends or anywhere, specifically. Still, if 64.7 reading in August is a genuine indicator of activity, we are seeing real recovery in the economy. In fact, July and August are now two highest PMI readings months in history of the series. On a quarterly average basis, we are at 61.5 so far for 3Q 2020 which is the highest in history, with the prior historical high registered in 1Q 2010 at 56.3. Current trough-to-peak swing in Manufacturing PMI for Brazil for the COVID19 period is incredible 19.5 points.
• Russia, in contrast, continues to show signs of weaknesses in the Manufacturing sector, with 3Q 2020 PMIs so far running at 49.8 - statistically reflecting zero growth. Notionally, this marks the sixth consecutive quarter of PMIs below 50 in nominal terms and a seventh consecutive quarter at or below 50. Current trough-to-peak swing in Manufacturing PMI for China for the COVID19 period is sharp at 10.8 points, and this before we establish any recovery (over 50.0) momentum.
• China Manufacturing PMI is currently averaging 53.0 for 3Q 2020, the highest reading since 4Q 2010. China posted statistically zero growth - PMI at 50.4 in 2Q 2020, on foot of a significant, but not catastrophic, contraction in 1Q 2020 at 47.2. Current trough-to-peak swing in Manufacturing PMI for China for the COVID19 period is relatively moderate at 5.8 points.
• India Manufacturing PMI for 3Q 2020 is at 49.0, having risen from the recession trough of 35.1 in 2Q 2020, and trough-to-peak swing is at 13.9 points.

Overall, BRIC Manufacturing activity index is at 52.3 as of the first two months of 3Q 2020, up from 45.0 in 2Q 2020 and 49.1 in 1Q 2020. The trend is for a substantial improvement over time, with the trough-to-peak swing currently at 7.3 points.The index is outperforming Global Manufacturing PMI that currently sits at 51.2 for 3Q 2020, up 7.6 points on the trough in 2Q 2020. 

Stay tuned for BRIC Services PMIs and Composite PMIs next.

30/8/20: COVID19 Update: U.S. vs EU27

 Updating charts for COVID19 pandemic for EU27 and the U.S.:

As per above two charts:

• 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 (313.0 currently).
• U.S. deaths per capita continue to increase (555.6 currently).
• Overall counts of deaths in the U.S. are now above the EU27, since July 12, with current excess gap at +42,946 up from +15,413 a month ago. 
• In other words, despite the facts that (1) EU27 population is significantly larger than that of the U.S., (2) The U.S. onset of pandemic is of later vintage than that of the EU27, allowing for more significant impact of learning and pre-peak preparations in the U.S., and (3) The U.S. demographic being younger than of the EU27, the U.S. has experienced almost 43,000 more deaths than the EU27.
• 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 555.6; Current death rate per 1 million of population in the EU27 is 313.0.
• Put differently, current U.S. death rate per capita is 77 percent above that for the EU27. 
• Overall counts of deaths in the U.S. are now above the EU27, since July 12, with current excess gap at +42,946 up from +15,413 a month ago.

Per above charts and table:

• The U.S. is still experiencing its first wave of infections. 
• The trend in the U.S. suggest that the peak infection has taken place in the second half of July. 
• The EU27 daily counts of new cases are on a sustained and rapid rise since mid-July and currently exceed the levels at which the original EU lockdowns were imposed. In fact, new cases counts are now approaching prior peak for the EU27.
• U.S. deaths are continuing to run substantially above those in the EU27.  
• Adjusting these for vintage of cases, expanded learning curve in treatments and testing that the later pandemic onset in  the U.S. implies, this severely poor performance of the U.S. cannot be explained by any factors other than political decisions and the dismal state of public health system.
• Since mid-July, EU27 new cases are now trending slightly up once again, and deaths are starting or rise as well.
• The table above shows that during August, 892 more Americans died a day, on average, compared to the residents of the EU27. Given the fact that the U.S. deaths reporting is more lagged and less consistent that for the EU27, this number is likely an underestimate of the true extent of the gap. 
• Notably, higher deaths in the U.S. in August are in excess of the same in June and July.

Perhaps the best way to summarize thee bleak reality of the U.S. numbers is by relating these to relative shares of world population:

30/8/20: COVID19 Update: Worldwide Cases and Deaths

 

Updating charts for COVID19 worldwide data, with main comments in the charts:

• Global number of daily new cases was on an upward trend through July 2020. Since the start of August, however, new daily cases additions have been flat (running at approximately constant rate) at the levels close to the prior peak trend (< 260,000 per day). This suggest that although pandemic growth rate has fallen to close to zero, the pandemic continues.
• In the last 30 days, average number of new cases stood at 259,500, with the current 7-days average at 255,986. This implies a mild moderation in the rate of daily cases arrivals that statistically is close to nil, as noted above.
• Week-to-date, daily case numbers ranked within top 25 in 5 days, which is an improvement on the mid-August trends.
• Overall, there are some indications in the more recent data that the trend in new cases will likely moderate toward 240-245,000 per day in the next 7-10 days. Such a moderation will not, in itself, be sufficient to mark the end of the first wave of the pandemic. This conclusion is further supported by the evidence that Europe and parts of Asia-Pacific where the pandemic's first wave started earlier in the year are now experiencing robust increases in new cases (see subsequent post on EU27 data).

• In July, average growth in death cases was +5.79%. August-to-date, the average is -2.36%. Last 7 days average is -0.86%. This suggests that slight moderation in new death counts experience earlier in August has been declining toward zero in more recent days.
• In the mean time, daily deaths are still running at high rates. 30-days average is 5,726 deaths per day and 7-days average is 5,360.

• New daily cases growth rates are moderating. July average daily growth rate in new cases was 10.35%. This fell to 0.27% in August (to-date).
• In July, average growth in death cases was +5.79%. August-to-date, the average is -2.36%. 

Due to steadily increasing number of countries with large number of cases, I have adjusted my summary tables and analysis for countries with largest impact of the pandemic to those with 100K+ cases (prior tables covered countries with 25K+ cases):

Key conclusion: the pandemic remains unabated. The rates of growth in cases and deaths might be moderating, but daily counts of both remain high and consistent with peak levels of the pandemic. We are now 6 months into the full pandemic development and there are few signs of any material improvements on the ground. Almost 25 million people have now been officially identified as being infected and almost 840,000 people have died from the condition, per official counts.

26/8/20: Germany's Exports Expectations: Some Bad News

 ifo Institute's latest exports expectations for Germany are out and the data is quite interesting:

Firstly, expectations moderated in August, compared to July, although on balance, there are still more positive sentiment responders as opposed to the negative ones. This moderation is surprising, because of the sharpness of prior COVID19-related collapse and because August saw more global relaxation of COVID19 restrictions. 

Secondly, it appears that expectations for exports growth are now starting to revert back to pre-COVID19 'norm' of anaemic growth. This can be best seen by looking at longer term expectations data:

For those nostalgically inclined, 2019 was a woeful year for global trade, as reflected in the 2019 average in the chart above. And this was before COVID19 pandemic. In fact, exports outlook has been deteriorating from around mid-2018, on. 

A return to the pre-COVID19 'normal', if confirmed, is not the good news, given that German exports did not recover from the knock-down they sustained during the COVID19 pandemic.

26/8/20: Q2 2020 Corporate Earnings and Revenues

 

Factset latest data on STOXX600 earnings for 2Q 2020 is dire: 

In basic terms, earnings figures managed to beat estimates only because analysts' expectations of earnings drop off were even more gloomy than the already dismal outrun. 

Year-on-year revenues growth was also bad:

Notably, sharper declines in earnings compared to revenues implies little gains in terms of any productivity or efficiencies during the pandemic response. 

25/8/20: Irish Tourism & Travel Post-COVID

My article for The Currency this week covers the path for recovery in Ireland's (and global) travel & tourism sector: https://www.thecurrency.news/articles/22340/why-tourism-could-take-four-years-to-get-back-to-where-it-was-in-2019.

25/8/20: Germany's Economic Recovery: ifo Survey

ifo Institute's latest economic barometer for Germany is showing continued signs of recovery in the German economy, with remaining pressures in terms of current assessment of business conditions and more positive outlook forward (expectations):

Business expectations are now ahead of the same for December 2019 - February 2020 pre-pandemic period, which really says little about the levels of activity expected and more about the speed of adjustments to the expected activity. What matters more is the current climate perception. This is still some 11 points below the three months prior to the pandemic.

Given that German economy has largely moved past the stage of restricted activity, this is worrying, as it suggests the lack of domestic demand recovery in the medium term.

23/8/20: America's Scariest Charts: Continued Unemployment Claims

 

Having updated non-farm employment data (https://trueeconomics.blogspot.com/2020/08/23820-americas-scariest-charts.html), let's take a look at continued unemployment claims, as reported through the first week of August.

A chart to start with:

Continued unemployment claims are still falling.

• The weekly rate of declines is improving. Most current week on week decline is 636,000, an improvement on prior week/week decline of 610,000. $ weeks average weekly rate of decline is 326,750. 
• Latest continued unemployment claims are at 14,844,000 which is down from the COVID19 peak of 24,912,000 set in the week of May 9, 2020. 
• We have registered reductions in continued claims in 11 out of the 13 weeks since the peak claims.

Here is the chart comparing historical records of recovery in continued claims to the current crisis perid:

And the same on the log scale

Comparing current continued claims to pre-recession period claims:

• Current levels of claims are 8,687,000 higher than pre-recession period high, 13,195,000 above the pre-recession trough and 13,142,000 above the claims registered in the last  month before the onset of the recession.

The key takeaways from this are: 

1. What matters from now on is not so much the level of the recession peak, but the rate or the speed of the recovery toward pre-recession 'normal'. So far, the rate of recovery has been fast. If sustained, we might be able to avoid much of the damage that arises from long-term unemployment duration. 
2. The rate of benefits expirations will also matter a lot. We are looking at eligibility for unemployment dropping with weeks ahead, and the supplemental payment to unemployment insurance also falling off. As the two effect bite, the impact on the overall economy from reduced unemployment support schemes can be pronounced, triggering renewed recessionary risk. 

Stay tuned for the analysis of the first time unemployment claims figures next.

23/8/20: America's Scariest Charts: Employment

 

Good news, folks, just in time for the Republican National Convention. The latest data, through July 2020, shows some recovery in non-farm payrolls numbers that is bound to make a feature in political chest-beating coming up next week.

Behold the chart:

In basic terms:

• July non-farm payrolls stood at 139,582,000, up 1.291% on June, and up 9,279,000 on the COVID19 pandemic trough (April 2020). 
• Average monthly rate of jobs recovery has been so far 3,093,000 through July. Which is worse than 3,749,500 average rate of recovery recorded through June. In other words, we are potentially seeing a slowdown in jobs recoveries.
• At current average monthly rate of recovery, it will take us just over 4 months to regain jobs lost to COVID19 pandemic, assuming no further slowdown in the rate of recovery (a strong assumption).
• Currently, non-farm payrolls sit 12,881,000 below their pre-COVID19 peak employment levels, attained in February 2020.

Some of these are good news. Assuming the recovery dynamics remain unchallenged by:

1. Natural rate of moderation in jobs recoveries
2. Renewed pressures of COVID19 (see the latest on this here:https://trueeconomics.blogspot.com/2020/08/23820-covid19-update-us-vs-eu27.html), or a second wave of the pandemic
3. The ravages of political uncertainty surrounding November 3 elections (not only Presidential).

One side note: the above comparatives are current-to-past. These, of course, do not take into the account where the U.S. employment figures would have been, absent COVID19 pandemic crisis. Whilst estimating potential employment levels is a hazardous exercise, taking a simple exponential trend (decaying over time) from August 2018 through the latest reported period implies potential July employment level ex-COVID19 of 153,267,800. Which is not that much of a gap to the pre-crisis peak. 

Another side note: if we assume that the rate of decay in jobs additions that prevailed between June and July 2020 (-17% decay) continues into the future (also a strong assumption), jobs recovery to the pre-crisis peak will take us through May 2021. For the pre-pandemic trend case, the recovery will take us into March 2022.

More data analysis of the U.S. labor markets is coming up in subsequent posts, stat tuned.