These indices measure the level of activity as measured against the pre-pandemic level using the Google Mobility Indexes as adjusted by Independent Strategy. Activity is an average of the economic and mobility measures. The data are weighted and averaged over seven days to define the trend. The data runs through to 11 September. The current deviation from where things stood pre-crisis is shown in Figure 1.
Slight increase in Chinese FX reserves in August, the $10.2bn m/m gain taking total holdings to $3.165trn. But the build should have been far greater based on exchange rate changes and balance of payment flows. Indeed, adjusting for FX valuation changes reserves actually fell again slightly (for the third consecutive month).
August’s non-farm payrolls report came out basically in line with expectations (+1.371mn vs +1.400mn consensus). While we saw a modest downward revision to the July release, the report reinforces the overall “repairs underway” story for the labour market. Part of this was due to further strong growth in government payrolls (+344k), private payrolls (1.027mn) were rather further from the markets more confident expectations.
We’ve been honing high-frequency indicators to follow the pace of recovery in major economies from the depths of the Covid pandemic lockdowns. Our indicators, entitled mobility and economic activity indexes, measure the level of activity against the pre-pandemic level using the Google Mobility Indices and the Dallas Fed’s Mobility Engagement measure. We adjust these to obtain a smoothed and comparable index of near-time activity.
July credit data showed a deceleration of flow month on month, RMB loans issued dropping to RMB1,020bn from 1,903bn the prior month while total social financing came in at RMB1,690bn (RMB3,432bn prev). Credit flow remains strong compared to last year but with real economic activity picking up clearly the authorities have stepped back from the credit driven boost delivered over the past few months.
Another solid non-farm payrolls report, with 1.763mn jobs added in July, taking the 3-month gain to 9.27mn. That means the US has now recovered roughly 40% of the jobs shed during the turmoil of March and April. The report cements confidence that the labour market continues to repair, mirroring the conclusions of yesterday’s weekly jobless claims, if not the lower than expected ADP print we got on Wednesday.
While credit extension matched consensus estimates in June the overall picture is still strong. New loans growth is running at +13.2% y/y, well in excess of the current rate of nominal GDP growth, while the total social financing figures hit CNY3.42trn, underpinned by rising local government bond financing, which lurks in the “other” category. Year-to-date total social financing is now at 80% of the full-year 2019 numbers,
The recovery of the US labour market continues. ADP reported 2.369mn jobs were added in June. This was accompanied by a sharp upward revision to May’s report (initially reported as a loss of -2.760mn job and now revised to a gain of +3.065mn. That might bring it closer to the May non-farm payrolls report (+2.509mn) but is nonetheless a rather astounding revision, which perhaps encapsulates the problem of accurately measuring the Covid shock.
Chinese credit expansion continues at pace, total social financing hitting CHY3.19trn in May up from CNY1.71trn a year earlier. The jump has been predominately driven by the ‘other’ section which is largely local government bond financing, which suggests the authorities have reverted to traditional investment driven support to support the Covid-economy.
The disruption from the Coronavirus continues to impact the data with the employment numbers for May showing a significant deviation from expectations and the near 2mn loss reported in the May ADP report. Indeed, based on the preliminary numbers the economy added 2.51mn jobs over the month, which compares to the 20.69mn jobs lost in April. Methodological problems are again in evidence ...
While some of the Chinese activity indicators might have perked up, there is no hiding from the disinflationary pressure stalking China’s economy. April CPI dropped back to 3.3% yoy (4.3% in March) while PPI sunk to -3.1% from -1.5% in the previous month. And the problem would be even worse were it not for persistent food price pressures as the impact of the earlier swine flue epidemic continues to pressure meat prices. Indeed, CPI ex-food is now running at just 0.6%.
There is little sign of a slowdown in credit growth in China as the authorities continue to try and drive cash into the disrupted economy. Total social financing came in at a robust CNY3.09trn while overall new loan growth hit CNY1.701trn. This marks a significant pick up in credit creation, with household debt up nearly 2% pts of GDP since the end of last year while NFC bank debt has jumped from 95% to 102% of GDP.
The monetary mutualisation of Eurozone debt (or its sovereign risk) through the ECB is becoming more likely. The fiscal monetisation of debt through the issue of Coronabonds is becoming less likely. Monetisation is feasible. The arithmetic works. If you add up all projected fiscal deficits in the Eurozone for this year, the total comes to almost exactly the fire power the ECB has approved.
While the decline in first quarter GDP (-4.8% q/q ann.) was not unexpected, the outturn still doesn’t represent the full scale of the economic contraction. The collection periods of the sample data are focused in the early part of the survey period and the assumptions the models make for the balance of the period rely heavily on these inputs.
Total Covid-19 infections may just have broken the two million barrier globally. But there are encouraging signs that, at least in some places, active cases have already peaked. Scientists’ understanding of the disease is still in its infancy and there are many questions we don’t yet have clear answers to. In particular, if we’re all exposed to the same disease, why is there such a wide variation in apparent infection, fatality and recovery rates from country to country?
Bleak payrolls report. While the median survey was always going to be a short in the dark, the -701k decline in jobs was significantly more troubling than the mkts -100k guess. That’s the worst number since March 2009, a period of losses that saw five consecutive payrolls figures below the -700k mark starting from November 2008. Looking at the past fortnights jobless claims figures the April number and revisions to this release will paint an even bleaker picture of the labour market. In the household survey nearly 2.987mn jobs were recorded lost.
ADP reported fewer than expected job losses for March, with a modest -24k drop (mkt -150k), which compares to the 3.3mn jump in initial jobless claims last week. Partly this is due to the survey dates (it tallies responses up to the 12th of the month). So we will see catch up next month. Prior month was revised down to 179k from 183k.
The rapid and devastating effect of Covid-19 on the labour market is unprecedented based on this week’s jobless claims. Initial claims in week ending came in at 3,283k which looks like a data error rather than an actual real data point. But real it is, and further increases look likely in the coming weeks as the economic stop continues to push people out of employment.
Europe has, for the time being, become the focal point of coronavirus contagion. Its epicentre is Italy (Figure 1), which…
Following on from our recent reports on the Wuhan Cornonavirus, the following spreadsheet offers a detailed breakdown of infections, spread and fatalities. This will be updated on an ongoing basis.