Macroeconomic & Geopolitical

Gross Domestic Product Just Needs More Product

April 2020 – 3 min read
While consumer spending led Q1 GDP to contract in the U.S. and across Europe, Q2 figures will likely be worse. Easing stay-at-home restrictions throughout the world will help foster a slow recovery along with supportive central banks and further fiscal spending.

Watchlist

Arrows indicate consensus forecast compared to the previous period. Local dates of release.
 

U.S.

  • The April Employment Report will show an unprecedented rise in unemployment but is set to understate the pain. Despite data irregularities—such as misclassifications, as seen in March, and changes to UI benefits resulting in many not being counted in the labor force—the unemployment rate will likely jump close to 15%. The consensus forecast is for a 21 million decline in employment—by far the largest decline in recorded history. However, the consensus forecast is less meaningful than normal, as projections span from -840 thousand to -28 million.

Europe

  • The BoE monetary policy committee meets on Tuesday. Similar to the Fed and the ECB, given already announced interventions and the extreme uncertainty surrounding forecasts, the Bank is expected to leave policy rates unchanged and take stock of the unorthodox measures’ effect on money, credit and financial conditions.
  • EZ retail sales for March are out on Wednesday. Following dismal numbers from various eurozone countries, the eurozone aggregate is expected to drop by 10% M/M. Unfortunately this is in line with sales contractions seen in other major economies such as the U.S., where sales dropped 8.7% in the month of March.

Asia Pacific

  • China trade data for April will likely deteriorate amid weaker global demand. While weak external demand will weigh on China’s recovery, China is less reliant on the world to growth than was historically the case.

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Christopher Smart, PhD, CFA

Chief Global Strategist & Head of the Barings Investment Institute

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