Analysis: at great speed in the deep recession

​Analyse: à vitesse grand V dans la récession profonde

Photo: Nam Y. Huh Associated Press
The plunge of economic activity is 2.5 times more important than the crisis of 2008-2009.

The latest statistics projecting into the rear-view mirror a vision asymmetrical economic weight of the pandemic. This recession is atypical may distribute burden unevenly from one industry to the other, the final bill will remain a bond of the public debt, of which an attenuation of the shock will come from access to credit at low interest rates.

The data from Germany and the United States have anything to stun them. 10.1% decline in GDP in the second quarter for europe’s largest economy, from 32.9 % for the largest economy on the planet according to a first estimate. The plunge one-third of the GDP in the United States at the annualized rate follows that of 5 % recorded in the first quarter. One speaks therefore of a decline of 9.5 % from April to June compared to a year ago. A drop of 10.6 % from peak to trough in the first half of 2020, calculates Oxford Economics.

If the magnitude is surprising, the speed is tremendous. The plunge of economic activity is 2.5 times more important than the crisis of 2008-2009, and that this, in only two months, against 18 months in what was called the Great Recession.

Aviation, tourism, automotive, oil… The quarterly loss are referred to as abyssal. 8.4 billion to the French Total, 18.1 billion for the british Shell, given as an example. In aeronautics ? Losses of 1.9 billion euros in the first half for Airbus, worth $ 2.4 billion to Boeing in the second quarter. In the automotive industry ? A half-year loss history 7.3 billion euros for the French Renault, 1.4 billion for the German Volkswagen.

Without counting the job losses announced. Of 175 000, and the accumulated, among the major airlines, from 57 000 among the giants of aeronautics, 34 000 at the major of the automobile.

If the damage caused by the pandemic are huge for some, the opposite, the food industry is doing rather well with, for example, a net half-yearly profit increase of 18 % for the swiss giant, Nestlé. While it is in the direction of “stratosphere” for the giants of the Net, with a doubling of net income in the second quarter for Amazon and Facebook.

Returning to the performance of the u.s. economy in the second quarter, the firm of research of Oxford-dissects the impact of the pandemic and the response in the form of containment and pausing pans full of the economy according to the major components of GDP.

Consumer spending plunged 35 %, business investment, 27 %, residential investment, 39 %, and imports, 53 %, and exports, 64 %. Only increase : government spending — especially federal — 2.7 %, coinciding with the launch of the support plan.

Government transfers

A support plan that explains in a surge of 33 % of the disposable personal income of households, ” under the generous government transfers “, wrote on Thursday the economists of the National Bank Matthieu Arseneau and Jocelyn Package. With the limited opportunities of spending, the savings rate has jumped to 25.7 % of disposable income.

“The increase in savings of 3100 billion US $during the quarter represents two times the decline in consumption expenditure” (1500 billion), mention.

A bill for which they will collectively pay. For 14 major developed economies, the rating agency Moody’s forecasts a debt/GDP ratio in average increase of 19 percentage points, roughly double the increase seen during the financial crisis of 2008.

The average deficit is expected to increase by 8 percentage points while the fall in nominal GDP would add about five points to the burden of the debt.

A weight that, little consolation, will be softened by an increased access to credit resulting from the low interest rates and a monetary policy still accommodative, said Moody’s on Thursday.

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