Corporate activity in The Monday Briefing
2020 on a 100-year view
Every generation has its own reference points, the big events through which lives are lived. The same is true of economists. For them the lows of the economic cycle are remembered by shorthand – the GFC, the dotcom boom, the early-90s recession and so on. As economists contemplate the economic effects of COVID-19 they are having to look much further back in history for precedents. This week’s briefing assesses how UK growth through to the end of next year is likely to compare with the ups and the downs of last 120 years.
Some (almost) knowns
The global financial crisis of 2008-09 ended a period of good and predictable growth for the world economy. In its wake we have seen elevated political and economic uncertainty, and weaker growth. Yet today that looks like a golden era. In just a month, the world has been pitched into a deep downturn, one that the head of the International Monetary Fund says will be “way worse” than the global financial crisis. The uncertainties are legion. So what can one say with a reasonable degree of confidence? Here are four, very subjective ones, that occur to me.
Lessons from past crises
Today we are launching our “The COVID-19 crisis: Economic impact and policy responses” chart book, which is available here: https://blogs.deloitte.co.uk/mondaybriefing/2020
/03/the-covid-19-crisis-economic-impact-and-policy-responses.html. The report will be updated weekly and aims to provide a graphical overview of the key economic developments of the COVID-19 crisis. Do feel free to use any of the charts in your own presentations.
Fighting the downturn
The economic policy response to Covid-19 is starting to catch up with the escalating scale of the crisis. It is driving a cart and horses through conventional wisdom. The post-financial crisis shrinkage of government borrowing is over. Radical economic policies are on the agenda. Public spending and debt are set to soar. France is ready to nationalise at-risk businesses; Germany plans to take equity stakes. Money-printing by central banks to finance government spending, once a taboo associated with Weimar Germany and Zimbabwe, is no longer out of the question.
The economics of coronavirus
Last week equity markets concluded that the spread of coronavirus has major implications for economic growth and corporate profits. Last week’s sell-off in US equities was the sharpest correction since the Great Depression in 1933. It is a measure of the concern of markets that the immediate reaction of US equities was greater than when news of the bankruptcy of Lehman Brothers broke in 2008.
Housing drivers
Spring seems to have come early for the UK housing market. The Royal Institution of Chartered Surveyors’ survey reported a sharp rise in new buyer enquiries and house price expectations in January. New instructions for house sales are rising at the fastest pace in over six years. House price inflation has edged up in the last couple of months.
Slower growth, plentiful jobs
One of the surprises of recent years has been the way in which, despite disappointing growth, unemployment has continued to fall. Britain’s growth rate has halved since the peak in 2014 yet the unemployment rate has maintained its downward trajectory and is now at the lowest level in over 45 years.
Assessing the impact of coronavirus
Coronavirus has quickly emerged as a risk to Chinese and global economic activity. The human effects matter most but the disease is having a marked impact on some areas of economic activity in China. The ultimate economic effect, is, like the path of the virus, unknowable. This week’s briefing reviews the evidence and looks at the lessons from previous infections.
Year-ahead webinar Q&A
We recently hosted our “Year-ahead webinar” to discuss the outlook for global growth with you. With limited time for Q&A, I was able to respond to only a few of the questions some of you posed. So, in this week’s briefing, the economics team and I respond to six additional questions, covering the themes that came up most frequently in your queries.
Who made money in 2019?
2019 was a good year for financial markets and investors, with global equities up 27% over the course of the year. All major asset classes ended 2019 up on the year and risk assets were clear outperformers.