A McKinsey & Co Insight

Economic indicators improved and trade began to recover; output and demand are still below pre-COVID-19 levels; recovery in the US, Brazil, and India is impaired by the ongoing public-health crisis.

Over July and August, the global economy stirred. Retail sales improved, manufacturing revived, and trade began to recover. The revived activity comes close on the heels of a punishing second quarter.

Most pandemic restrictions were in their fullest form then, and most economies measured large contractions in GDP, including –9.5% in the United States and –15.0% in the eurozone (year-over-year). China experienced its contraction (–6.8%) in the first quarter, and has since returned to growth.

As restrictions are lifted, countries in diverse regions are joining China and other Asia–Pacific economies in recovery. Demand and output are still below marks achieved in 2019, but an awakening has clearly begun. It comes at a cost, however. In many places the public-health emergency has not receded, and the virus continues to spread.

Virus levels are high and even accelerating in India, Brazil, and other populous Latin American countries, as well as in parts of the United States.In the consumer sector, global and country consumer-sentiment surveys conducted for July by the Organization of Economic Cooperation and Development (OECD) were steady and nearly positive, with outlooks approaching long-term norms.

Retail sales returned to growth on an annual basis—if slower than in pre-COVID-19 times–in Brazil, the US, and the eurozone. Sales contractions in China and Russia have steadily become smaller.Global purchasing managers’ indexes (PMIs) for July indicate slight near-term expansion in manufacturing and the services sector, at 50.3 and 50.5, respectively.

Manufacturing PMIs for individual economies also show expansion for the most part, with record growth recorded in Brazil; the indicator dropped further into contraction in India and Russia, however (Exhibit 1). The service PMIs mainly showed expansion in July, with marked gains in the eurozone and Russia; the indicator remains well in contraction territory in Brazil and India, however.

Trade is clearly rebounding: the CPB World Trade Monitor registered month-on-month growth of 7.6% in June (Exhibit 2). Imports and exports increased in most surveyed economies on a monthly basis. The Container Throughput Index increased to 111.5 points in June (107.7 in May, 107.8 in April); revived activity in Chinese ports is the main factor in the recovery in container traffic (which is still 4.3% below levels of one year ago).

Most business analysts and economists have commented on the extraordinary rise in public debt amid the COVID-19 crisis. Large stimulus packages are sustaining economies through the crisis, and many argue that more stimulus still is needed.

The low-interest-rate environment has made higher debt levels potentially manageable, but the International Monetary Fund and other institutions have sounded warnings that the growing burden will also slow recovery, especially in low-income countries. McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy.

Each full monthly release includes an executive summary on global critical trends and risks as well as focused insights on the latest national and regional developments. View the full report for August 2020 on McKinsey.com.

Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on McKinsey.com. The reports are available free to email subscribers and through the McKinsey Insights app.

Source: McKinsey & Company

Follow Asia Blockchain Review on:

• Telegram: https://t.me/asiablockchainreview
• Facebook: https://www.facebook.com/pg/asiablockchainreview
• Twitter: https://twitter.com/abr_blockchain
• LinkedIn: https://www.linkedin.com/company/asia-blockchain-review/
• Website: https://www.asiablockchainreview.com/
• Email: [email protected]
• Youtube: https://www.youtube.com/channel/UCMQ5CVu0c9-pMlwB8LUvkiA