«The recovery that has just begun is already over…» could sing Sergio Endrigo, adapting his global success (Song for you was translated into many languages) to current economic scenarios. And her melancholy voice would interpret well the socio-economic stage that we are living. A phase suspended between the desire to start leading a normal life again, in the shop as in leisure, and the fear of new interruptions caused by the emergence of other infectious outbreaks.
Outbreaks that are indeed recurring, near and far, in Italian cities (although in the country the dynamics of new cases is much lower than elsewhere) and to the antipodes, i.e. in the hemisphere where winter has just begun. It is a notice of what will happen to us in the autumn, with the drop in temperatures? That's enough to frighten consumers and entrepreneurs, to modify their behaviour, to have their spending plans put back in the drawer? And to do so doubt the solidity and longevity of the recovery which has just started, thanks to the easing of the restrictive measures of social life? Or is the alarm, as Mark Twain would have put it, grossly exaggerated?
The industrial production numbers for May confirm this an Italy in the pink jersey, with an increase that doubles that expected (+42% on April, against +24%), (in) followed closely by France and, detached, by Germany and Spain. Even the comparison on an annual basis sees Italy lagging behind less than the others.
The economic data for June, mostly qualitative, show that the increase in industrial activity it's spreading. The output component of the manufacturing PMI signals that it is no longer just China that is recording (and it does so for the fourth consecutive month) expansion, but also France and Turkey (at a sustained pace), Brazil and Russia, Italy and the UK.
Globally there was, last month, a further contraction in production: the indicator stopped at 47,0 (below 50=reduction). Just a few months ago that would have been considered a very bad figure. Today it is heartening in comparison with April 32,7 and May 39,2.
The improvement has been held back both from those who, in terms of health, you would have expected it and from those who were above all suspicion. You would have expected it from USA, who have not yet managed to bring the epidemic under control, which also appeared later and is proving to be far more devastating than in any other advanced economy, due to poor management. There the PMI output indicator was 47,5. You would not have expected it from Germany, South Korea and Japan, who have coped well with the virus, but whose industries are suffering much more, with output PMI indicators at 46, 40 and 32 respectively.
The explanation of these negative dynamics, not correlated with the internal trend of the epidemic, must be sought in the high weight of exports on GDP and in productive specialization in sectors where demand was the first to fall and will be among the last to rise: consumer durables, such as cars, and capital goods (machinery, heavy means of transport). But this also casts a gloomy light on the prospects of other countries.
A similar dynamic can be observed in the tertiary. Which has significantly decreased, globally and in all individual economies, the rate of contraction. The activity index PMI reached 48 globally (from 23,7 in April), surpassing the 50 threshold in Spain (50,2 from 7,1 in April), France (50,7 from 10,2), China ( 51,2 from 26,5 in January, but 55,0 in May) and Australia (53,1, from 26,5 the previous month).
However, these data are prior to worsening of the pandemic which was observed at the end of June and in the first half of July, so much so that Melbourne (Australia's second city) has returned to strict lockdown and that many states in the USA are recording records of cases and deaths. Therefore, the legitimate doubt arises whether this deterioration in health is followed by a deterioration of the economy as well, both due to the measures adopted by the authorities and due to the greater prudence in people's behaviour.
However, the watermark analysis of the data makes it stand out not small differences compared to the start of the pandemic. First of all, the increase in cases is associated with a wider and more intense swab campaign, while as a percentage of tampons, new cases are much less than in the beginning (although in the USA this percentage is increasing and doubled compared to a few weeks ago). Secondly, the percentage of new deaths versus new cases it has greatly decreased (less than 1% in the USA, where it was even close to 100%). These two pieces of information converge in the conclusion that the virus is now being carefully searched for and the sick are being taken and treated in the early stages of the infection.
However, this reassuring vision is difficult to convey to the population without letting their guard down. On the other hand, in communication the awakening or even the record of the absolute number of cases (In the USA). That of deaths, on the other hand, is far from the peaks of three months ago (in the USA it is 5% at the time, while the cases are almost double).
In short, the risk is that now, more than then, fear prevail. Healthy if it means responsible behaviour; phobic if it leads to shutting oneself up again at home and giving up spending. The surveys (and the one from IPSOS in Italy testifies to this) confirm the re-emergence of concern for one's own health and that of one's loved ones.
Another risk comes from the fact that the phase of the "Piave line" to save jobs is over, whatever the cost. Many enterprises have announced inevitable job cuts, against the absence of demand and excess production capacity. Others will follow their example. What about governments? Surely many programs will be extended to encourage enterprises not to reduce the workforce.
The fear of losing one's job and salary has dominated the reaction of consumers since the beginning of the crisis. Also for this reason, in addition to the lower spending opportunities, the savings rate is rising, while income is kept up by government transfers.
Household demand will therefore remain squeezed between fears for health and for jobs. Businesses will only have to adjust i investment plans to expectations of lower demand.
On the other hand, The hands of the economy they had warned from the beginning that after the splash there will be no quick bounce. And that the recovery would be long and slow and a "J" shape seen in the mirror. Now we are experimenting with it.
