Released: 22 March 2020
Global Growth Halted
World Economy Mired In Recession
The fall in economic growth is likely to worsen in Q2
The main contributors to global growth in recent years have been, in order of importance, China, USA, India, Eurozone, and Japan. All are now in recession or moving rapidly towards a fall in economic activity.
China - by far the world’s biggest economic growth engine - is in recession.
China accounted for approximately 35% of global growth over the past 3 years. February and March Sales Managers survey data for China
showed a dramatic shrinkage of economic activity (since confirmed by other data). Chinese Q1 growth is very likely to be negative, and Q2, although likely to show some recovery (March data is encouraging in that respect) is most unlikely to produce the sort of growth numbers seen in recent years.
USA, the second biggest contributor to global growth, is also in recession.
The USA has accounted for just under 18% of global growth in recent years, but the latest US Sales Managers Index
numbers suggest the economy shrank dramatically in March. The Headline Sales Managers Index and sub indexes covering Market Growth, Profits, and Business Confidence are all at all-time lows. Given the increasing impact of the Coronavirus, Q2 growth is unlikely to continue to contribute to global growth.
Indian economy in deep trouble before possible Coronavirus damage.
India has been the third major engine of global growth, accounting for almost 9% in recent years. This is unlikely to have been sustained in Q1 2020. The Indian Sales Managers Sales Growth Indexes
have all been on a declining trend for over 5 years, and February and March Indexes confirm the decline towards recession. India’s previously rapid growth has slowed dramatically in recent months, and may be much lower than suggested by poor quality official data
. And since India has not been affected badly by the Coronavirus as yet (or its poor public health systems have not registered the impact), the potential for further disruption on a major scale remains a high probability.
Eurozone very close to recession in Q4 2019 before the impact of Coronavirus.
The EU accounts for a bigger slice of global GDP than the US (22.8% as against 21.4% for the US in PPP terms) but has contributed less than 10% of global economic growth recently. Furthermore the rate of growth in the key Eurozone area has slowed to the lowest level since the bloc’s debt crisis 7 years ago. Q4 2019 Eurozone
growth was a meagre 0.1%. Given the severe Coronavirus problems in Italy and mounting problems in Spain, France and elsewhere, Europe is very likely to record a serious fall in economic activity in both Q1 and Q2.
Japanese GDP shrank dramatically in Q4 2019, and is likely to have experienced a further Q1 fall.
Japan has the world’s fifth biggest economy (counting the EU as a country) but is very unlikely to contribute to global growth in Q1 or Q2 2020. Japan's GDP shank by 6.3% in Q4 (annualised) as a result of misjudged tax rises, and this before the impact of Coronavirus problems in China and fears of Coronavirus in Japan itself became a factor.
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