Starting with Europe, we have seen a more optimistic view from the European Central Bank (ECB) in the past two weeks. On September 11th, the ECB released its latest economic outlook, which predicts a “strong rebound” in euro-area economic activity for Q3 2020. ECB board member Philip Lane, one of the report’s authors, went on to praise large increases in consumer spending in June and July, and noted that business investment was also recovering. This is a more optimistic assessment of Europe’s post-pandemic fortunes than we have seen in recent months.
The US economic recovery has also continued, but with some hiccups. Total industrial production rose 0.4% in August, missing expectations for 1%. This leaves US industrial output below pre-pandemic levels, but the positive growth rate indicates we are in a recovery (of sorts). Unemployment claims in the first week of September came in at 884,000, above forecasts for 846,000, but staying below one million for the first time since March. This is an indicator that the US labour market (much like the US economy as a whole) is still continuing to recover from the lockdown lows earlier in 2020.
In China, retail sales increased in August by 0.5% year-on-year (YoY). This is a small gain in absolute terms – but it is the first YoY increase in Chinese retail sales since the pandemic started, and, therefore, is a particularly notable turning point. In other data, Chinese industrial production rose 5.6% YoY, the most since December 2019 and a beat against the market’s expectations of 5.1%.
The major economic regions of the world are all now on the recovery path. The global economy is getting better… slowly. There is still a very long way to go, however, and the prospect of a ‘second wave’ of the virus this winter means there will probably be bumps along the road. But as time passes, the ability of healthcare systems to deal with the virus improves, progress is made on effective therapies and vaccines, and economic confidence is steadily recovering.
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