26 June 2020
US PMI’s show further evidence of quick recovery. The flash US service sector purchasing managers index rose to a four-month high of 46.7 in June from 37.5 in the previous month, IHS Markit said on Tuesday. On the other hand, the flash manufacturing sector purchasing managers index rose to a four-month high of 49.6 from 39.8 in May. The relatively stronger rise in manufacturing suggests that the factory sector is now seeing a quicker recovery. The composite index rose to 46.8 in June from 37 in the prior month. Notwithstanding the improvement, the readings remain below 50 which indicates worsening conditions. However the big picture is that the economy now seems to be on the road to recovery following the coronavirus lockdowns.
German consumer morale improves further as coronavirus restrictions fade. German consumer sentiment is set to recover next month reflecting the rapid reopening of the economy and society, survey results showed on Thursday. The consumer sentiment index, published by the Nuremberg-based GfK institute and based on a survey of around 2,000 Germans, rose to -9.6 heading into July, rebounding from -18.6 the previous month and beating forecasts for a more moderate rebound to -12.0. The pandemic is expected to sink Germany into its worst recession since World War Two and the government has approved two stimulus packages financed with record new borrowing to revive the economy.
IMF predicts deeper global downturn. The International Monetary Fund warned that the global economy faces an even deeper downturn than it previously projected as the coronavirus pandemic continues to sow uncertainty and businesses around the world struggle to navigate their way amid the virus. The Fund has downgraded its global gross domestic product (GDP) forecast for 2020, now expecting the world economy to shrink by 4.9 percent which is worse than the three percent contraction it predicted in April, the lender said in an update to its World Economic Outlook. For 2021, the Fund is predicting global output to decline by 5.4 percent. This would leave 2021 GDP some 6.5 percentage points lower than in the pre-COVID-19 projections of January 2020.
ECB minutes: bond purchase programme was effective tool. In the minutes of the European Central Bank’s meeting at the beginning of June, released this week, policymaker observed that the government bond purchases under the pandemic emergency purchase programme, or PEPP, and asset purchase programme, or APP, were an effective tool in the current environment. Still, policymakers acknowledged the risks and side effects of low rates, including the drain on savings and drag on bank earnings. They also noted that high government debt could pressure the central bank to keep rates low since higher borrowing costs could quickly raise debt sustainability concerns.
Australia: Easing in coronavirus lockdowns prompts a record-sharp surge in retail sales in May. Preliminary data shows that Australia’s nominal retail sales in May skyrocketed at the fastest rate on record amid easing coronavirus lockdowns. They jumped 16.3 percent compared to the previous month in seasonally-adjusted terms, sharply contrasting April’s record 17.7 percent free fall, which was caused by widespread shutdowns. The surge was broad-based. Particularly pronounced increases were recorded in clothing, footwear and personal accessory retailing and cafes, restaurants and takeaway food services. On an annual basis, retail sales climbed 5.3 percent in May, contrasting April’s 8.9 percent plunge which had marked the sharpest decrease on record.