InvestNow News – 12th June – Harbour – A bold bounce
Hamish Pepper – Jun 11, 2020
Key Points
- Many economies, including New Zealand, are re-opening and recovering faster than expected
- High growth rates are normal after such a large contraction in activity and the recovery, so far, is partial
- Ongoing policy stimulus is expected, given the residual uncertainty
As COVID-19 infection rates slow, economies are re-opening and activity is rebounding earlier than many forecasters had expected. Government restrictions on people’s movement have eased in most of the world’s largest economies over the past month, and global business sentiment surveys have bounced off multi-decade lows, suggesting that global growth likely bottomed in April (see figures below). The US labour market unexpectedly added 2.5 million jobs last month (following 22 million job losses in the two months prior), reducing the unemployment rate to 13.3% from 14.7% previously. The New York Fed’s weekly US economic index derives a common signal from several high frequency indicators and supports the bounce, suggesting US economic activity was 10% lower y/y in late-May, versus 11.5% lower y/y in late-April.