The times of the economic statistics lag behind the count of infections, and the devastating surge of Covid-19 in America will be reflected in economic data lagging, apart from some monitoring based on Big Data But until November the qualitative indicators held in America better than in Europe, where the incursions of the virus are slowing down.
When will the history of this crisis be written, the part of the "super-hero" will certainly go to economic policies. If the retail sales, in America, in Europe and in Italy, they are back well above the pre-virus level, this is due to the massive support – budgetary and monetary – provided by Governments e Central banks. A support that will have to continue and will continue, given that the ongoing restrictions on both sides of the Atlantic they will once again undermine incomes and spending.
Fortunately, the other half of the sky holds. The Asia Development Bank has improved growth estimates for the continent, in 2020 and 2021. And that half of the sky is more than half: Asia's GDP is now larger than the rest of the world's GDP and grows faster. And, again fortunately, help is arriving on both halves: England was the first to start the vaccination and other countries have followed suit or are about to follow suit. Of course, the challenge, medical, logistic and cultural (no-vax!) scares, and it will take many months before a significant part of the population is protected from Sars-CoV-19. But the light at the end of the tunnel there is.
The most timely data (November) on PMI indices signal, especially for i services, a clear difference between United States ed Europe: continued growth in America and a relapse into recession in the Eurozone. Of course, too America will soon be in retreat in services: in the first 10 days of December the weekly average of infections is climbed above 200 thousand, while it stabilized at high levels in Europe. And from one to the other side of the Atlantic Ocean impatience with restrictions is growing. The quarter that is about to end will see negative growth in Europe and positive (but slowing down during the quarter) in the Use. And the first quarter of 2021 will still be difficult for both.
Inflation continues to drop at the level of consumer prices:in China price dynamics has even become negative (tendency to -0,5%), even if there the main culprit lies in the prices of pork, a staple food of the Chinese. At this point inflation it seems free from the various cyclical positions and obeys the powerful structural factors, linked to technology and globalisation, which continue to limit price increases. In the'coming year there will be one more significant share of unused resources in the world economy (output gaps well below zero) and it is therefore unlikely that the rebound in GDP, unanimously expected, will lead to substantial changes in the inflationary scenario.
At the level of producer prices there are no further settlements, but stabilization: below zero for China ed Europe and close to zero for the Use. In general, the goods economy has held up better (or less badly) than the services economy, and this explains the stability of producer prices. The quotations of raw material, supported by the demand of the two major world consumers – China and the USA – recorded new advances, both at the crude and non-oil level.
Long-term rates are not very varied compared to last month: returns of T Bond remained around 0,90%, however slightly up on a few months ago, while those of Waist (again at 10 years) show -0,60%, however slightly down compared to a few months ago.
But the mood of rates around the world is always bad: even in Australia registered a negative rate, albeit limited to 3-month bonds; while in Portugal even the 10-year bond recorded a yield below zero for the first time (-0,1%). The btp continues to sparkle (from the point of view of the debtor, i.e. the State, certainly not from the point of view of the saver) and the return touch another record, at 0,55%, with one spread at its lowest since 2016. Nothing that happens in the tortuous corridors of the Palace touches public securities: the ECB is there that sees and provides.
The fall in inflation weighs down, of course, i real rates. These should be even lower, but wishful thinking will remain so.
For the you change, the pessimism of Lancet of the past months on dollar it was justified. We are, against euro, at about 1,21, while the yuan it too strengthened, to 6,55. On the strength of yuan there is no doubt: theChinese economy it is the one that came out of the virus first and the one that has the best prospects for 2021. But why the euro is so strong? It has also gained ground against the Chinese currency since the beginning of the year! On the one hand, the advantage of the real long-term rates which had the dollar against the euro. On the other hand, it may be that i international capitals see in Europe a rebound potential. After all, the way to make money is to buy when things go wrong…
In fact i stock markets continue to see the glass half full. The lingering suspicion that they were right was confirmed by the third-quarter US national accounts corporate profits data, which increased not only from the previous quarter – which was normal – but also from the third quarter of 2019, a quarter that was still completely unaware of the virus. And it was belied the equally lingering suspicion that the markets were wrong… See what faith can do in the Vaccine!
Their, as it was said last time, has resumed the role of well shelter, in the sense that it no longer follows the trend of the Stock Exchanges: when these are doing well, there should be no need for shelters. And in fact at the end of November the price of the yellow metal had collapsed below 1800 dollars/ounce, only to recover lately, but always well below the summer highs.
Dear Zaffaroni, thank you for your kind words. I stopped collaborating with the Sole for years. Now I write in a small newspaper – the Quotidiano del Sud – set up by the former director of the Sole Roberto Napoletano.
As for my surname, I define myself as Roman because I was born in Rome and went to school there. But she's right and we don't have to go far in the ancestry. My father was from Inverigo, in the province of Como…
Happy Holidays!
Dear Dr. Galimberti, after having read it in the pages of Il Sole for many years (before and after the Riotta "management"), and always as a priority, I am happy now to find it again in this beautiful online journal that I did not know and which now I attend assiduously. The reading of the Lancette is back (here together with Dr. Paolazzi), an editorial idea that I have always found unique and original in the national economic press. However, I wouldn't mind finding here some thematic articles by him, the clear ones with unrivaled metaphors that I used to read in "solar" times.
Cordial greetings.
Virginio Zaffaroni, Saronno
PS Forgive the indiscretion. I read that in his personal file he is defined as "Roman". Yet that surname of his resonates thick (and almost exclusively) in my Lombard lands, at least those between the Ticino and the Oglio, and, in its sonorities, it smacks of Lombard and Frankish origins. I like to believe that his distant ancestors were at home in the Duchy of Milan (or in the Lombard provinces of the Serenissima).