Double-Dip Ahead?
Sharp Contraction in France
Eastern Europe Covid Deaths
Furloughed Job Disguise
No Trade Deal
Yes, Deaths are a Problem
Due to another Covid surge in Europe and the US, the odds of a double-dip recession (or a delay in the current one ending) have increased.
Europe is also at risk from a collapse in a trade deal between the UK and EU following Brexit.
First Things First
Before you can have a double-dip recession, the current one has to end first.
And that largely depends on how one measures it.
Europe vs the US
European countries typically use a simple rule. Two consecutive quarters of contraction marks a recession.
In the US, the NBER can declare a recession even before there is one quarter of contraction. It did so in February of this year.
I have seen claims the US recession is over already. But the recovery is so uneven I doubt the NBER (the official arbiter of recessions in the US), would see it that way. But perhaps they do.
In Europe, countries may very well declare a recession is over as soon as there is a single quarter of growth.
Whether or not there is a double-dip may be in the eyes of the beholder.
Flash PMI Signals Renewed Economic Downturn
In Europe, Flash PMI signals renewed economic downturn at start of fourth quarter.
Business activity fell back into decline across the eurozone in October as accelerating growth of manufacturing output was overwhelmed by a steepening deterioration in the service sector amid rising COVID-19 worries.
Germany was the only bright spot, as France and the rest of the region as a whole fell deeper into decline. The rate of job losses eased, but forward -looking indicators deteriorated: inflows of new business showed a renewed decline and business optimism for the year ahead slipped to the lowest since May.
Deflationary pressures meanwhile eased as business costs rose at a faster rate. The flash IHS Markit Eurozone Composite PMI fell for a third consecutive month in October, dropping from to 50.4 in September to 49.4 to register the first contraction of business activity since June
US Recession Over?
Some claim the US recession is already over. If so, it was the most uneven recovery in history.
An L-, K-, or W-shaped recovery isn’t much of a recovery whether or not there is a double dip.
For further discussion, please see It’s Professionals vs Everyone Else in the K-Shaped Recovery
Mish
“If so, it was the most uneven recovery in history.”
Disney World: open for months
Disneyland: still closed.
Even the Fed has been calling for more bailouts for what, two months?
Mish’s reports have made it clear for a while….we have another dip coming. Unless massive bailouts are rolled out soon… it is likely to be worse than the first one.
I do not favor additional lockdowns….but a coherent national push for simple public health measures (which we will probably come closer to in a Biden administration) would go a long way toward easing the coming pain. Just sayin’
I have an idea. We could start some studies to test which antiviral works best, only this time, give the antivirals to people on a timely basis. An antiviral is only going to work if you give it at first sign of infection. If you give it to patients in the hospital, they are past the replication phase, and it isn’t going to help.
We’ve had 8 months, now, and how many studies have been done on patients where the alleged antiviral was given at the first sign of infection? Regeneron did their study that way, so it will probably show that it is effective.
On the bright side, I did hear that a study was recently started in Southern California that is going to test HCQ+zinc and Ivermectin given early. Better late than never. Now test Remdesivir early, and favapiravir early, too, and figure out which ones work best, and then, when someone gets a positive test, give them something, and don’t just send them home.
It’s not like this isn’t known. Trump was important enough that he got not one, but two antiviral treatments, both within days of his positive test. Let’s find the best treatments, and make them available to everyone, and we can get on with life.
That said, even without a pre-hospitalization treatment, there has been a huge drop in mortality worldwide. The leading explanation for that is that mask wearing is causing people to get milder cases.
These are all good ideas.
In my neck of the woods, homebuilders are revving up. I just read announcements for 2 new townhouse developments within a couple miles from me. Maybe due to people moving to suburbs. Not sure.
I was planning on building a shed. No hurry. Took one look at lumber prices. I’ll wait.
I remember reading an article last year about boomers who invested in woodlands in the SE during the ’90’s as a way to supplement their retirement income. The article was lamenting that there was now a glut of wood, so their investments weren’t playing out as planned. My how things have changed!
Look for Canadian lumber to make a comeback after the tariffs are rescinded. I sure hope so…lumber is something I actually buy.
The economy can’t be solve until Covid is dealt with . You’re simply not going to have people confiently going to the movie theater, bars & restaurants etc while this hting is out there. Europeans are losing resolve and getting burned out from wearing masks and social distancing so the infections are rising again.
Northern hemisphere upswing in cases, hospitalizations, and inevitably deaths as life moves indoor.
Don’t look too closely, it might burst your bubble, but cases in Sweden are now higher than their previous peak.
Sweden’s cases are high, but they are showing very few deaths (yet) on this peak. Finland, Iceland, and Norway are also seeing higher cases, but few deaths. Those Vikings seem to have less severe cases than most of the countries of the world.
It’s definitely not your typical recession since the cause is medical rather than economic imbalances and that makes comparisons with earlier ones much harder to make. It seems that it has taken six years of economic trends and collapsed them down into one. On top of it it has destroyed the idea of Austerity as a policy and there is no going back at least in this cycle.
“it it has destroyed the idea of Austerity as a policy”
How?
If spending money we don’t have causes a depression, the solution is obviously not to spend more money we don’t have.
Temporarily spending money we don’t have to overcome a temporary hardship brought about by something other than over-spending, is a viable argument. These two situations should not be confused.
The bankers and some companies were bailed out in 2008. No one went to jail. Were did the money come from ? It was created out of nothing and put them back into the drivers seat. Austerity was not the consequence but a deliberate decision to starve one part of the economy, main street, in order to “pay” for the money they had create out of nothing. One part, the banks basically, got free money and the other got higher taxes, less services. A central bank can create money and destroy money AT WILL. Spending money you don’t have does not make sense for a central bank. Creating so much money that causes too much inflation is the central problem.
Yes, this recession might be termed an artificial recession.
While it is true that lockdowns hurt business, it is only for awhile. If you get the pandemic under control, as they did in some countries, business returns to normal. Unfortunately, if you don’t get the pandemic under control, people are not fools, and they stay home. In the end, business ebbs and flows with cases and deaths.
My state has never had a lockdown. My business goes up and down with cases, and right now it is dropping again because cases and deaths are rising. So, is it an “artificial recession”? Those that did nothing to discourage the spread of the virus are the cause the slow economy that I expect to see all winter, so I agree with you.
The US flash PMI came in strong 55.5
Manufacturing–11% of GDP, 8% of employment
Markit’s flash PMI is a composite, though I admit I put more weight on ISM
Flash U.S. Composite Output Index at 55.5 (54.3
in September). 20-month high.
▪ Flash U.S. Services Business Activity Index at
56.0 (54.6 in September). 20-month high.
▪ Flash U.S. Manufacturing PMI at 53 3 (53.2 in
September). 21-month high.
If the economy wa at 100 and dropped to 60 and now back up to 80..that’s not good. Tes #’s over 50 signify growth but off a very low base. 55 today is not the same as 55 in Jan/Feb–
Have you ever been to dinner at the house of a pretty poor cook, and you finish up, saying, that wasn’t too bad….
But then they bring out dessert, tofu grasshopper pie…
Have you ever gagged when you took the first small bite?
TMI.