Better than first feared

Posted by: Paul Donovan

01 Sep 2020

Daily update

  • The German government will revise economic forecasts today. The precise numbers will be precisely wrong, because there is no precision in economic data at the moment. The trend is expected to be more optimism about the economic outlook. This is likely to be repeated in other countries. Governments—and investors—underestimated how fast and how effectively people would adapt to the crisis. Economic activity will be bad this year, but not as bad as first feared.
  • South Korean GDP was revised up for the second quarter. August export numbers continue to show an improving trend, reflecting the global economic bounce-back (focused on goods more than services).
  • Japanese second quarter capital spending was weak. This reflects an acceleration of a structural trend already in place. Home working means that a country uses its existing capital stock more efficiently, reducing the need for companies to invest. The increase in home working is good for the economy (something governments should recognize).
  • Eurozone consumer price inflation is due. This is not especially interesting as markets are convinced interest rates will remain low for longer, and price data is unlikely to change that. There is a large forecast range, as peculiarities in specific product market create uncertainty.

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