We knew that the measures we were being asked to take as a nation would cause severe damage to the economy. Here, and around the world. Our Governments have been asking us to put lives before everything else, and in the most part, we have been doing so.
Now, we are starting to see the first bits of data published which is beginning to show the scale of the shock that we’re going to see. IHS Markit has tweeted in the past couple of days charts which show the economy in many parts of the world in freefall:
🇺🇸 Flash U.S. PMI drops to 40.5 in March (49.6 - Feb) as private sector firms signal a marked contraction in output in March amid the escalation of the outbreak of COVID-19. Service providers register an especially sharp fall in output. More: https://t.co/qvPMu4aQ4x pic.twitter.com/DxinIjyMPy— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
Flash UK PMI drops to record low of 37.1 in March, as the COVID-19 pandemic dealt a more severe blow to the UK economy than during the financial crisis, even before more stringent measures for shops, pubs and restaurants announced last Friday. More here: https://t.co/l6mZjC7JDw pic.twitter.com/F4nMuCgYtV— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
COVID-19 caused the largest collapse in business activity ever recorded in the eurozone, according to our data. The Composite Output PMI fell to 31.4, falling over 20 points and signalling a quarterly contraction of approximately -2%. More: https://t.co/hKFPEEwKhI pic.twitter.com/kT7tGWLN9p— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
Flash Germany PMI points to a quarterly contraction of almost 2% in March (Composite Output Index at 37.2). Services activity contracted at an unprecedented rate not seen in 23 years of data collection. More: https://t.co/Enq8Uxjq7i pic.twitter.com/pDKb8cZ1AU— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
March Flash France PMI suggest GDP is collapsing at an annualised rate approaching double digits, with the Composite Output PMI at an all-time low of 30.2 (51.9 - Feb). Both services and manufacturers recorded extreme drops in output on the month. More: https://t.co/puMKE94b5c pic.twitter.com/c5JzTKIubK— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
#Japan's economic downturn deepens drastically in March, dragged down by a sharp contraction in the service sector, according to #PMI data as #coronavirus outbreak led to plummeting tourism, event cancellations and supply chain disruptions. Read more: https://t.co/t8fIv8YsoD pic.twitter.com/2UUJKAN9i7— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
Flash #PMI data indicated business activity across #Australia private sector fell at a steeper rate in March, led by a sharp fall in services activity as COVID-19 hits demand. Read more: https://t.co/sTGq4z87dX pic.twitter.com/Tciyp8Xy1S— IHS Markit PMI™ (@IHSMarkitPMI) March 24, 2020
UK households signalled the strongest degree of pessimism towards job security since December 2011 during the March HFI survey, resulting in a sharp deterioration in financial wellbeing. Read more: https://t.co/DQFWVp0scY pic.twitter.com/deyG41Z5Gi— IHS Markit PMI™ (@IHSMarkitPMI) March 23, 2020
Some of these drops are worse than the 2008 financial crisis, and we’re only at the start of this crisis. Figures for the rest of March and April I would expect to be worse still.
In the US, a record 3.3m people have registered unemployed in a single week. The previous record was half a million in the early 80’s. Millions more are expected to file in the coming weeks. The Treasury Secretary in the US has warned US unemployment could reach 30% very quickly. Whilst in the UK we are desperate to find out the support package for the self-employed, we have still done a lot more for businesses and workers in this country than the US. Their $2tn support package has only just passed and there was a lot of wrangling between Democrats and Republicans over it. They have been disadvantaged further by this delay.
Life before money
The above charts are of course dramatic, and will get worse over the next couple of months before some kind of recovery might materialise. But I could not be clearer in my opinion that damage to the global economy is absolutely worth the sacrifice if we can save millions of lives. We have all seen the charts which show how tens of millions could die around the world if we do not act. That number of dead would overwhelm any health case system on the planet. And if we do not have a functioning health care system, we have nothing.
I am starting to see in the UK and the US commentary around whether we should be scaling back these measures to help the economy. Knowing full well that lesser measures will allow more people to die and put even more strain on health care systems. I am stunned that even the notion of that debate is being brought up. Are we truly that heartless? Does money mean more than life? People claiming that an economic depression would kill more people than the virus. Do people really believe that? Governments around the world are stepping in to support people, this is not the Wall Street Crash.
Remember also that this is temporary. Granted the lockdown is going to be here for longer than we think. The initial three week period is likely to stretch to another month. As it has done in other countries. But at some point, we will be allowed to go back to work. Social distancing measures will be in place for a long time, mostly likely the rest of the year. But the halt to work will not last all year, and we have to make sacrifices to make sure we don’t lose loved ones in the coming months.
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