KUWAIT: MAY 7, 2020
Markets around the world took a much-needed breather in April as plans of gradually reopening the economy started to emerge.
US GDP PLUNGES, JOBLESS TOTAL SURGES
High-frequency indicators have started to reveal the massive hit taken by the economy from a combination of ‘stay at home’ orders, business closures and supply chain disruption that began mid-March. Most remarkable has been the surge in new jobless claims, which have risen a staggering 30 million (cumulative) in the six weeks to April 24. This looks consistent with a rise in the unemployment rate to above 15% from 4.4% in March, and potentially heading towards the 25% peak recorded during the Great Depression. These figures include a large number of furloughed workers and those forced to work part time, so the hope is that they will fall back quickly once businesses reopen.
Meanwhile, survey activity indicators have plunged to multi-year lows. Both the manufacturing and non-manufacturing ISM indices – which had held up surprisingly well in March – sank to just under 42 in April (50=no change), consistent with a deep economic contraction across the economy. Even these scores likely overstate economic conditions, with lengthening supplier delivery times – ordinarily signifying suppliers struggling to keep pace with demand – contributing positively to the headline index but in reality a source of economic disruption. Various index sub-components paint a much gloomier picture however, with production in the non-manufacturing survey collapsing to just 26, new orders at 32 and employment at 30 – all series lows.