The rare pandemic has forced swathes of the global population into what the International Monetary Fund calls “The Great Lockdown.”
In fact, some gauges of manufacturing and retail sales in major economies are showing improvement. But hopes for a V-shaped rebound have been shattered as the reopening of businesses looks shaky at best, while job losses risk turning from temporary to permanent.
“There is a real danger of confusing rebound with recovery,” Carmen Reinhart, the World Bank’s chief economist, said.
The World Health Organisation warns the worst of the pandemic is still to come as cases top 10mn and deaths surpass 500,000.
The IMF estimates that by the end of this year 170 countries - almost 90% of the world - will have lower per capita income. That’s a reversal from January, when it predicted 160 countries would end the year with bigger economies and positive per capita income growth.
Central bankers remain on the alert to do more. Federal Reserve chairman Jerome Powell has warned the outlook is “extraordinarily uncertain” and European Central Bank president Christine Lagarde has spoken of a “restrained” recovery that will change parts of the economy permanently.
There, for sure, are pockets of recovery that could gain traction.
Morgan Stanley economists are sticking to forecasts of a V-shaped recovery, pointing to positive surprises in recent economic data, especially in the US and euro region. Goldman Sachs Group economists revised down their estimates for the US this quarter, but predicted it will be back on track in September.
Markets are split between investors who are betting on a V-shape recovery, and those expecting significant dislocations.
The MSCI All-Country World Index of global stocks has gained nearly 40% from a March low, but is still down about 6% this year.
For lessons on how the recovery plays out, look at Asia.
The virus has been brought under control in many countries, but the rebound has been mixed.
In South Korea, which flattened its infection curve months ago, the emergence of new virus clusters is casting a chill on shoppers.
China’s manufacturing activity climbed in June, as did other manufacturing gauges across the region, yet new orders continue to show weakness.
In the US, jobless claims - one of the traditional series capturing developments - have come down. But layoffs remain at extremely elevated levels, a troubling sign that the labour market recovery may be stalling, according to Bloomberg Economics.
Consumption fell about 16% below normal in the second quarter in the four largest economies in the euro area.
The uneven path to recovery with a worrisome outlook means businesses are navigating in the dark.
“The recovery is not V, it is not W, it is looking like the top of a chainsaw,” Joerg Wuttke, president of the EU Chamber of Commerce in China. “Up and down and up and down and painful all the way.”
For sure, every pandemic is a worrying global economic emergency, but mercifully, they are relatively rare too.
