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Coronavirus (COVID-19): Global business, economics, and stock markets updates

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Dave Zan

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I think the answers are nuanced and a bit contrary to commonly held views and not as simple...
... So you can have bad employment numbers and the economy still not enter a recession or depression.
I am not...heartless or cruel here. Just...the reality...

That is indeed a nuanced, excellent post that deserves a considered response.
So I waited a few months to have some actual data because I have read too many rubbish, fact-free Covid posts to want to add to the list.
Firstly, your post did not strike me as heartless or cruel but rather as almost classic Marxist.
That's no criticism, I have often noticed serious financial journalists use quite Marxist analysis.
They differ from Marx only in their moral position whether inequality is problem or an opportunity.
I know "Lefties" whose preferred news source is the Wall Street Journal.

So, as to the correct measure of "The Economy", I think the best choice is probably GDP, year on year.
GDP is a blunt instrument but at least it's widely available and fairly consistent, especially from year to year of a particular country
It is also less prone to some of the problems you mentioned of asset price distortions and so on.
I first compared Australia and Sweden, after some commentators confidently predicted that the Australian Covid precautions would disastrously impact the economy compared to less restrictive countries.
Hmm, Australia GDP fall for 2020 was a comparatively small 1.1 % (Australian Bureau of Stats data) versus 2.8% fall for Sweden (Statistics Sweden).
And the Covid death rate in Australia is almost 40 times lower, tens of thousands of deaths less.

I don't want to look triumphalist about Australia so next looked at China because their death rate is an order better still.
China GDP didn't even fall, it actually increased by 2.3 % (BBC report of preliminary data)
The obvious comparison is the US, a fall of 3.5 % (CNBC report) and a death rate about 500 times worse.
Taiwan (best major economy in the world both GDP performance and Covid death rate) and UK (worse major economy in both) just confirm the trend.

So how has the mostly successful Covid response and consequent comparatively mild economic impact played out in Australia?
The main effect to many people has been a remarkable real estate boom.
Not what I initially expected, to say the least, but economic stimulus measures have combined with limited options to spend the money - no overseas vacations, no cruises, limited restaurants etc.
So people have piled into real estate.
I am pretty happy with that, I would have been morally conflicted to profit from additional people's deaths.
Not sure I could buy, say funeral company shares.
But the increase in the value of my home makes me feel better even if it's mainly a paper win.

I suppose that's a positive note to finish on but I'm not quite sure what people in other countries can take from this.
That the best economic action is actually not investment advice but rather not to believe or enable denialist political bull shit?

Best wishes
David
 
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RickSanchez

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I suppose that's a positive note to finish on but I'm not quite sure what people in other countries can take from this.

Alas, correlation ≠ causation.

There are myriad factors that drive a given country's GDP growth (or decline). Certainly a country's response to Covid is an important piece. But there are so many other components that are in play. (e.g., country A's economy might be proportionally much more reliant on tourism/hospitality vs. country B.) As such the top-line GDP numbers -- vs. Covid response -- can provide an interesting starting point but it requires significantly more data and analysis before any conclusions can be drawn.
 

Frank Dernie

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That the best economic action is actually not investment advice
When there was talk of lockdown here and reference to the 1918 pandemic I did a little searching for some historic info.
It seemed then that the countries that locked down quickly had the fewest deaths and recovered fastest economically.
I won't be surprised if history repeats itself.
The other negative side of not locking down soon enough and the consequent high case number is the likelihood of variants evolving is much higher which probably isn't good for controlling the spread with vaccines.
 

Willem

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Now that the data on the fourth quarter are in for the Netherlands, we have the number for the entire year: a 3.8% decline in gdp. Projection for 2021 is a 3.7% growth and then 3.9% in 2022. So for the economy as a whole this is not really too bad, but different sectors will have experienced quite different trajectories. Bars and restaurants have been hit hard, but I am sure they will recover, though maybe not their individual owners. Small shops may not recover quite so easily, because some business has moved to online retailers. This is culturally unfortunate because it will empoverish the texture of our city life. Obviously the travel industry has taken a hard hit as well. The airline industry is unlikely to recover quickly, and all the more so since the movement to limit flying for ecological reasons has gained a lot of strength, particularly for short and medium haul flights, and replace flying with train travel. This train travel has also been hit hard, but I expect it to recover fairly quickly, and experience continued growth thereafter. There are plans in the works to improve European long distance high speed train connectivity and to redevelop the European night train network. The temporary decline in passenger numbers provides some welcome breathing space to increase capacity to meet a demand that has been growing strongly in recent times.
The Dutch housing market is currently quite overheated, with prices going through the roof: credit is dirt cheap, and construction levels have been low ever since the 2008 financial crisis. Plans are now being made to increase housing construction significantly, but this is not easily done. There is a real shortage of building locations, and of construction workers. At the same time there is a national plan to make housing more ecologically sustainable by drastically reducing energy consumption, and this too will put a demand on construction capacity.
Finally, the Covid pandemic has generated a widely shared national consensus that public services have to be improved and strengethened. This will cost money, and hence taxes will have to go up. Fortunately, our national debt was very low at the beginning of the crisis, so even though we have now borrowed quite a bit, the debt is easily sustainable.

And of course, with vaccination now being ramped up massively after a faltering start, we expect everyone to have at least had a first dose in early July (my wife and I are expecting to receive ours in early April). Now that many of the elderly have been vaccinated, mortality has already declined to below the levels of normal years (there is no flu this year). I expect that many (not all) of the economically important restrictions will be lifted by the end of the month. There is light at the end of the tunnel, and I have started to plan my summer bicycle tour, although maybe, like last year, to Germany rather than France.
 

MarcT

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Now that the data on the fourth quarter are in for the Netherlands, we have the number for the entire year: a 3.8% decline in gdp. Projection for 2021 is a 3.7% growth and then 3.9% in 2022. So for the economy as a whole this is not really too bad, but different sectors will have experienced quite different trajectories. Bars and restaurants have been hit hard, but I am sure they will recover, though maybe not their individual owners. Small shops may not recover quite so easily, because some business has moved to online retailers. This is culturally unfortunate because it will empoverish the texture of our city life. Obviously the travel industry has taken a hard hit as well. The airline industry is unlikely to recover quickly, and all the more so since the movement to limit flying for ecological reasons has gained a lot of strength, particularly for short and medium haul flights, and replace flying with train travel. This train travel has also been hit hard, but I expect it to recover fairly quickly, and experience continued growth thereafter. There are plans in the works to improve European long distance high speed train connectivity and to redevelop the European night train network. The temporary decline in passenger numbers provides some welcome breathing space to increase capacity to meet a demand that has been growing strongly in recent times.
The Dutch housing market is currently quite overheated, with prices going through the roof: credit is dirt cheap, and construction levels have been low ever since the 2008 financial crisis. Plans are now being made to increase housing construction significantly, but this is not easily done. There is a real shortage of building locations, and of construction workers. At the same time there is a national plan to make housing more ecologically sustainable by drastically reducing energy consumption, and this too will put a demand on construction capacity.
Finally, the Covid pandemic has generated a widely shared national consensus that public services have to be improved and strengethened. This will cost money, and hence taxes will have to go up. Fortunately, our national debt was very low at the beginning of the crisis, so even though we have now borrowed quite a bit, the debt is easily sustainable.

And of course, with vaccination now being ramped up massively after a faltering start, we expect everyone to have at least had a first dose in early July (my wife and I are expecting to receive ours in early April). Now that many of the elderly have been vaccinated, mortality has already declined to below the levels of normal years (there is no flu this year). I expect that many (not all) of the economically important restrictions will be lifted by the end of the month. There is light at the end of the tunnel, and I have started to plan my summer bicycle tour, although maybe, like last year, to Germany rather than France.

Lol, maybe they all learned how to code, or build solar panels!:D
 

Willem

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Workers did indeed leave the industry for other jobs, retired early, were not succeeded by a new generation etc. Installing solar panels has indeed been a booming business, but only for some workers. The architectural design office who designed our house had some twenty people in the late nineties, and now has ten.
 

Dave Zan

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Alas, correlation ≠ causation.

Yes, I did major in stats at university so this is not entirely a revelation.

correlation.png
Credit: Randall Munroe, XKCD.com

Note that my post never claimed that correlation was causation.
But do you really believe that there is not a causal relation between the Covid pandemic and the world wide economic downturn?
Seriously?
So why bother with the statement?
It reminds me of the tobacco companies' use of the same statement- the fact that it is a truism isn't the point, it was just to try to avoid an unpleasant conclusion.

There are myriad factors...But there are so many other components that are in play. (...proportionally much more reliant on tourism/hospitality vs. country B.)...more data and analysis before any conclusions can be drawn.

This is also reminiscent of tobacco companies' same "there are other factors" attempts at obfuscation.
Of course, there are always other factors, no doubt there will be many theses and PhDs written to attempt to unravel them.
But it seems clear that the Covid pandemic has been the dominant factor for many countries' economic declines.

You have a reasonable point about differences in economies but I deliberately paired rather similar economies for just this reason.
Perhaps I should have spelled it out.
Australia vs Sweden as typical small/medium developed Western countries, similar socioeconomic indicators and political freedoms.
US vs China as the two dominant mega economies of the world with vast internal markets not reliant on, say external tourism, to use your example.
UK vs Taiwan both medium sized trade oriented economies on islands just off major continental economies, the EU and China respectively.
Both are democracies that control their own borders for their respective entire islands, if they have the political will.

Since your reply I have looked at Brazil, for which I don't have an equivalent pair.
But the sharp economic decline is consistent with their very serious Covid death rate.
So I haven't seen any data that would make me alter my conclusion, that the claims that anti Covid measures would adversely effect the economy were completely ill advised.
It is essentially the same conclusion as Frank Dernie's in post #245.
...historic info.
It seemed then that the countries that locked down quickly had the fewest deaths and recovered fastest economically.
I won't be surprised if history repeats itself.
Except it seems that 2020 data shows history has already repeated itself.
Certainly Australia has done well medically (1) and had comparatively only a mild economic impact and is on track to a fast recovery (2).
I just hope other countries can follow the example, or even better, New Zealand's or Taiwan's.

Best wishes
David

(1) "Certainly" in the sense that I follow the Australian data more closely, so I am more certain.
(2) "On track" but we're not cocky yet.
 
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Frank Dernie

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Except it seems that 2020 data shows history has already repeated itself.
Certainly Australia has done well medically and had comparatively only a mild economic impact and is on track to a fast recovery.
Indeed it has, I had been looking at this sort of thing worldwide though I am not sure enough time has yet elapsed to be sure a new wave doesn't change anything.
Certainly our government here in the UK were completely rubbish in pretty well every way except the vaccination rollout and there is no equivalent to that in the 1918 pandemic, obviously.
 

MarcT

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Regarding Italy, I think I saw just the other day(it's actually kind of hard to believe) that they have only vaccinated THREE percent of their population so far. Does anybody know if this can be correct? And if so, why is this the case? If true, this is a really sad state of affairs for them. At that rate, their economy will not recover for a very long time.
 

Dave Zan

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...time has yet elapsed to be sure a new wave doesn't...

Australia has just started to deal with a new wave...
On the other hand, the latest data from Credit Suisse is extraordinary.
3 months back I said that a mostly effective response to Covid had driven a real estate boom.
Based on median value Australia is now one of the wealthiest countries in the world (the table excludes Monaco and a few other small tax havens).

Wealth.PNG

Source: Credit Suisse Global Wealth Report 2021.

The surprise doesn't stop there.
It is well known that Mean values are influenced by outliers, one multi-billionaire like Jeff Bezos makes a hundred thousand homeless people into rich men, mean value.
I was surprised to see Australia has a comparatively lower difference between Mean and Median than most other countries.
It doesn't seem to correlate well with Covid response, the 2nd and 3rd ranked countries (Median table) are close to the extremes, one very bad the other the opposite.
The failure of the US to even make the top 20 in Median wealth is probably too sensitive for me to want to discuss it.
Anyway, data to think about.

Best wishes
David
 
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Willem

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Regarding Italy, I think I saw just the other day(it's actually kind of hard to believe) that they have only vaccinated THREE percent of their population so far. Does anybody know if this can be correct?
Mid March is a long time ago, but if your information was a bit dated at the time it may well have been correct then because the first large supplies of the Pfizer vaccine were only begining to come in in February. However, Mario Draghi put an army logistics expert in charge, and within the limits of available supplies Italy has been very successful since then. My colleagues at university in Italy told me that there has been mandatory vaccination for everyone in education. By now about 30% of the population is fully vaccinated and some 55% has had one dose. So for the one dose metric Italy is doing as well or badly as the USA, but still lags behind on the full vaccination metric. Mind you, these are percentages of total population and not of adult population. And to add my local perspective for the Netherlands: it is 54% with at least one dose and 32% fully vaccinated (but we have a young population). By now all adults over 18 have been invited for their first dose, and those willing will receive them within two weeks from now. Current estimate for vaccination willingness is 87%, and increasing. So from now on it is mostly the second doses that have to be administered, plus special programs to persuade an unwilling Bible Belt and hesitant people in underprivileged areas, in big cities in particular. It will be a race against the delta variant.
 

Willem

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As for the economy, the Dutch economy is bouncing back quite happily, with shortages in many parts of the labour market. Business failures have been relatively few, thanks to financial support from government, and thanks to good digital infrastructure that allowed many to work from home.
 

Frgirard

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A little early to rejoice. The dust is under the carpet and at some point it will have to be removed.
The plutocracy saw its financial income increase by 80%. The people will pay.
 

Midwest Blade

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Next waves of the Delta and Gamma strains have yet to be felt by the unvaccinated. I sense will we have some restrictions and shutdowns possible in the coming months. Don't throw out your masks just yet. Time for some patience and perseverance. I am actually quite surprised in the economic resilience and vitality, a lot of business's have really adapted to survive.
 

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personal opinion, this thing is infecting way too many people over the globe, it's basically a must that it mutates so fast that herd immunity by vaccine is impossible, much like seasonal flu... masks and minimal international flights will become a norm
 

muslhead

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[QUOTE=" I am actually quite surprised in the economic resilience and vitality, a lot of business's have really adapted to survive.[/QUOTE]
Dont be. Humans are amazingly resilient and have proven this time and again, against all odds. Covid, at least so far in its original state, is a tiny challenge as compared to past.
 

Wes

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automation decouples employment numbers and the economy; produces resilience and vitality in the face of a major pandemic

Things have changed, and much of the change will be a permanent restructuring of the economy. Many of the changes were underway before but were greatly accelerated by Covid.
 
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