Are things better than we think? (Maybe)

Posted by: Paul Donovan

18 Feb 2020
  • The US Empire State business sentiment opinion poll is due. The German and EU ZEW surveys of professional forecasters are due. When there is a big economic story in the media, surveys react to the news cycle. People answer using instinct, not reality. Professional forecasters are more likely to use hard data and reality. Thus, the ZEW survey may matter more.
  • There are now countless indices of how quickly China's economy is normalizing after the coronavirus. They all look at the same thing, so they all give much the same answer. China appears to have operated at around 50% capacity last week. However, global supply chains should have enough inventories to smooth some of the disruption.
  • Technology means we may underestimate China's normalization. Travelling is used in the normalization indices – but if people can work from home, they will be economically productive without travelling. Online shopping is more important. There may be problems with delivery, but the economic activity should be at time of sale, not time of delivery.
  • UK labor market data is due. This remains a strong aspect of the UK economy. Sterling was hurt as the interminably tedious EU-UK divorce had aggressive language from the UK's negotiator.

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