Macroeconomics

Growth

4 May 2021

9 April 2021

Whole Economy PMIs (Feb.)

February’s batch of whole economy PMIs suggest economic activity in non-oil sectors across the region eased last month on the back of tighter virus containment measures. Aside from the UAE, vaccination programmes are struggling to get going and restrictions will weigh on domestic activity for some time.

3 March 2021
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Higher GDP forecasts due to vaccine

We now assume that vaccines will be rolled out in the euro-zone next year and that most of the restrictions on economic activity are lifted during Q2. As a result, demand rebounds fairly rapidly and GDP increases by around 5% next year, regaining its pre-Covid level in early 2022. Webinar Invite: The European outlook – From lockdowns to vaccines Thursday, 3 December Chief Europe Economist Andrew Kenningham will lead this special briefing with colleagues Jessica Hinds, Jack Allen-Reynolds and David Oxley to discuss Europe’s economy under lockdown. The team will preview the ECB’s December meeting, assess Sweden’s attempts to control the pandemic, and look ahead to the potential economic impact of vaccines in 2021. Complimentary registration here.

Auto slowdown in Thailand, Singapore bouncing back

Despite having successfully contained the virus, which has allowed daily life in Thailand to return to normal quicker than in other parts of the region, the country is still set to be one of the worst-hit in the region this year, with GDP likely to fall by 9%. Meanwhile, figures released today show that retail sales in Singapore fell by a massive 52% y/y in May. But with restrictions being eased, a strong rebound in consumption is likely.

Renewed spike in virus cases to prevent full recovery

The May activity data were consistent with our below-consensus forecast of a 9% q/q drop in Q2 GDP. Consumption should rebound more forcefully over the coming months as households receive cash handouts and restrictions are eased. What’s more, we doubt that the authorities in Tokyo will respond to the resurgence in virus cases with another state of emergency. Even so, households will probably refrain from activities that involve close proximity to strangers, keeping spending well below pre-virus levels.

Renewed outbreaks will slow recovery in activity

A fresh outbreak in Victoria has brought weekly cases close to their previous peak. That resulted in many Victorians being placed back into lockdown and caused panic buying of essentials to restart. We still expect overall activity in Australia to continue to improve as restrictions are generally eased. But new outbreaks will slow the pace of recovery and reduce the likelihood of a boost to GDP from a restart of domestic tourism.

Retail Sales (May)

Retail sales rose above pre-virus levels in May and probably kept rising in June. As such, a sharp rebound in consumption in Q3 following Q2’s slump is all but guaranteed. However, services spending will probably fare worse and the phasing out of fiscal support measures will be a headwind towards year-end.

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