PMI survey readings for November unsurprisingly indicated a setback in the recovery. The silver lining is that it’s a lot less compared to the first lockdown. It’s the challenge beyond implied by a stricter tiering system that’s the new concern. A difficult winter no doubt. The recovery will only get down to business when a vaccine is rolled out.
The incoming data for October shows what was widely expected, a slowdown in momentum. Mobility indicators have retreated as much of the world has reverted to some combination of reimposed restrictions. At least there are hopeful signs across countries of the latest wave having peaked or indeed being in retreat, but it is still early days.
While it’s lockdowns and growth downgrades on this side of the World, things are different over in China. Its impressive recovery rolls on, with the export sector playing a handy supporting role.
To cushion the economic fallout of a second lockdown in England, the Bank of England is expected to supplement the extended Job Retention Scheme with a further dose of monetary stimulus later this week. And that’s after the small matter of an historic US election.
With a reality check on the recovery having been provided in recent weeks, forecasters are beginning to trim their expectations for the recovery in 2021. While labour market data underlines how the damage to date has been felt most keenly by the young.
Customarily a month renowned for beer festivals, October is shaping up to be quite the opposite this year with restrictions around the hospitality sector to varying degrees across the UK. Indeed, time has been called across the pubs in Scotland’s central belt. Daily Covid-19 cases continue to surge across much of Europe, snuffing out any glimmer of hope for a V-shaped recovery. The ball is in the policymakers’ court, yet again.
Changes in our behaviour amidst a second wave are becoming ever more apparent. While renewed restrictions are weighing on economic activity in much of Europe – including Northern Ireland. Over in the US, the fear is policy paralysis will undermine the recovery. Buckle up for a bumpy Autumn.
In the face of increased restrictions and signs of waning economic momentum policy support is being dialled up. While data last week laid bare the mounting level of public debt as revenues decline and spending balloons. Farewell furlough.
Consumers have been driving the recovery in developed countries. But signs of fatigue are beginning to show. With much of the initial pent up demand sated and labour market stress building, policy makers are increasingly being called upon to do the unexpected. Is the Bank of England finally coming to terms with negative rates?
Staging a retreat from outsized policy stimulus was never going to be straightforward. Indeed in many countries the trend is in the other direction. The French government has announced a €100bn stimulus plan, while its Spanish and German counterparts look set to extend their furlough schemes. Might the UK recovery need a bit of a helping hand, too in the coming months?
