What's going on?
Recent economic data suggests the global recession that analysts have been predicting and investors have been dreading is already here.
What does this mean?
Wherever you look, there’s evidence of an imminent slowdown in – if not a total collapse of – economic activity. Looking Stateside? US exports via ocean freight were at less than half their level in early March than they were at the same time last year. Looking at Europe? Germany’s new car registrations fell 38% in March versus a year ago, and the UK’s dropped 44%. Looking further afield? Vehicle sales in South Africa tumbled 30%. And not to dig the boot in, but there are more than a few foreboding global economic surveys too…
Why should I care?
The bigger picture: Psychic cyclicals.
“Early cyclical” companies like FedEx and Airbus – whose fortunes tend to follow the direction of the economy as a whole – have said it’s still too early to know how long this malaise will last, or how costly it’ll be. But they’re likely to notice the changing economic winds before anyone else: international logistics – which represents around half of FedEx’s revenue – could be one of the first things to pick up when countries reopen for business, while aircraft manufacturer Airbus will hope to see new plane orders flood in when airlines regularly start flying again.
Zooming in: Mon Dieu!
In an example of how the coronavirus shutdown is impacting economies, the Bank of France estimated on Wednesday that the French economy shrank 6% last quarter compared to the one before – the country’s biggest drop since after World War II. The French central bank reckons the economy contracted 1.5% for every two weeks of shutdown, but also that things might not be as bad this quarter as people get used to staying indoors.