Today’s March quarter GDP result — a decline of 0.3%, seasonally adjusted — is a historical oddity, probably the most meaningless national accounts result in decades.
The real damage of the pandemic will be reported in three months, for the June quarter, and by that stage in September — barring another lockdown — we’ll have a much clearer sense of how the economy is recovering.
The United States has already had its first-quarter estimate — a contraction at an annualised rate of 5% and a precursor to what will be the largest single plunge in GDP so far recorded when the current quarter is reported in coming months.
The US economy was already in a far more parlous state than ours, with Trump — predictably — utterly bungling handling the pandemic, leading to more than 105,000 deaths and counting, and lockdowns prematurely lifted amid tens of millions of unemployed.
That was before the mass protests and civil unrest triggered by yet another police murder of an African American, the brutal response of US authorities, and the exploitation of the protests by extremists and criminals — including Trump.
There are more important issues at play than economic growth in the US, but the civil unrest sweeping the country ensures the chances of a rapid economic recovery will grow fainter.
Civil unrest causes immediate and long-lasting economic damage — much more so than natural disasters, after which people and businesses rebuild and move on. And chances are the protests will prompt an increase in COVID-19 infection rates too.
To Australia this matters as much as the health of the Chinese economy. Without a US economic recovery, growth elsewhere will be weaker — especially in China where exports are under pressure as surveys of manufacturing show a slide in export orders.
So all eyes will be on coming economic data in the US to determine how bad things were before the riots hit.
The first top tier data report for May is the labour force report on Friday (late Friday night Sydney time). US economists think the unemployment rate surged to 19.8%, smashing April’s record of 14.7%. The actual rate in April, including those on support programs, was 19.4%, so the real rate could be closer to 24%.
That will be after the latest weekly unemployment benefits claims data, which is expected to show another fall to “just” 1.8 million from last week’s 2.1 million, bringing total benefit claimants in recent weeks to 44 million.
Get used to those kind of double-digit numbers — or worse. After the very poor figures on consumer spending and trade for April released last Friday, on Monday the Atlanta Federal Reserve estimated economic output could drop 52.8% in annualised terms in the second quarter. That’s not a typo. It was a little deeper than its previous 51.9% estimate.
It’s not all complete gloom: the May survey of US manufacturing showed a small improvement in the index from 41.5 to 43.1 — but it’s all relative, as it is still in deep contraction territory.
Consumer spending has slumped from previous record lows, with personal consumption expenditure in May falling a record -58.1%, while savings have surged through a combination of lockdowns and US$3 trillion of transfer payments from the federal government in support spending to households.
Private domestic investment growth fell by a record -62.6%, beating the April record of -61.5%. April trade data showed goods exports slumping 25.2% to US$95.4 billion in April, a 10-year low.
The slide was led by a 65.9% collapse in shipments of motor vehicles and parts. Although imports also fell by a nasty 14.3%, the trade deficit widened 7.2% to US$69.7 billion. That will also be a drag on second-quarter GDP because the deficit will not close in May and June.
And remember all of this is before the disruption over the past week as American society melted down. It’s hard to see how the US polity can return to functioning anything like normally while Trump and his merry band of anarchists and white supremacists remain in power.
Herbert Hoover and Andrew Mellon dramatically worsened the Great Depression by refusing to do anything to address the economic and social dislocation that followed the 1929 crash.
Trump and the terrorists who staff his administration are actively trying to make things worse. And the rest of the world will pay for it along with Americans.
the pandemic was just the last nail in Scomos trickle-down low wage economic blueprint for Australia, we were heading for a recession before the virus hit, you cant have 7 years of casualization of the workforce coupled with relentless downward pressure on wages and the slashing of penalty rates without a recession, by this time next year regardless of whatever happens re the coronavirus we will be in a deep long term recession, the only thing that can turn it around is a lift in pensions and for the government to maintain the Newstart payment at what it is today and not cut it back to the $40 a day it was before but I doubt if this economically illiterate trickle down bunch of clowns even remotely understand that.
Oh but, we’re going to have home renovators grants & pass the parcel musical houses’ games, to keep us amused, as we batten down the hatches…
The latest events in the US aren’t something dreamed up by Trump and the Republican Party. These events are the culmination of over forty years of US Government and corporate corruption, starting with Nixon, being solidified by Reagan and then finished off by the Democratic Party in the form of the two Clintons. The US is now completely at the mercy of the corporate oligarchy. Trump is as Hitler and Mussolini were the logical outcome of the persecution and exploitation of the 99% by the rich 1%.
In the short term the US economy will disrupt our economy be various mechanisms, but the long term problem is that most Australians see the US as a benevolent force in the world. It is not. The US has been responsible for around 7 million deaths around the world due to its rapacious greed for other people resources. Every US president could be indited on war crimes as a consequence of their invasions of other countries and the associated sanctions they have imposed.
In 1953 they saw the overthrow of Mossadgh’s democratically elected government in Iran, because their pommy mates wanted to protect the Anglo Iranian Oil Company form nationalization. This company is now known as British Petroleum. The US did a deal with Iran over nuclear materials and then reneged on it. This shows their duplicity and arrogance, a duplicity and arrogance underscored by Richard Blumenthal’s characterization of the US as the “indispensable nation.” This idea was later parroted by Madeleine Albright the person when asked by 60 Minutes correspondent Lesley Stahl:
“We have heard that half a million children have died. I mean, that is more children than died in Hiroshima. And, you know, is the price worth it?”
To which Ambassador Albright responded,
“I think that is a very hard choice, but the price, we think, the price is worth it.”
As long as Australians keep thinking that the US is the indispensable nation and that they have the moral high-ground they will be screwed.
What Australians need to understand is that nothing lasts forever, especially empires like the US and that Australia prosperity and future is in the hands of Australians, not declining empires like the US or nasty totalitarian dictatorships like China.
Spot on Robert,but you didn’t include the millions of poor children and adults that have died because of the imposition of economic and other sanctions that America has imposed on poorer nations at the drop of the hat because they refused to dance to America’s tune . The b grade actor Reagan referred to the Soviet Union as the evil empire which I think was a classic case of “the pot calling the kettle black.
Well said NAP,
Having recently returned from a cycling holiday in Cuba, I observed and experienced first hand what effect the 60 year embargo imposed on Cuba by the US has had.
They have had to rely mainly on their neighbour Venezuela for their oil, until recently due to sourcing and refining issues( possibly sabotage) their reserves are unable to be exploited. Venezuela’s been thrown an economic lifeline by Iran in sending 5 oil tankers, in defiance of sanctions placed on that country by the US.
It may well be appropriate to be reminded, that in spite of sanctions and animosity shown towards Cuba and Venezuela by the US. What countries offered their medical and humanitarian help to the US when Hurricane Katrina hit New Orleans in 2005 with loss of some 1,200 lives ? – Cuba and Venezuela, which was rejected by the Bush administration!
The manner in which the Bush administration turned its back on that disaster and the inadequacy of its response, is a matter of record.
Is history repeating itself in Trump’s response to the Covid-19 pandemic?
https://www.aljazeera.com/news/2020/06/iran-ready-ship-fuel-venezuela-threats-200601082627973.html
Nice synopsis Robert. We know who senator Palpatine is. It’s a pain being interested in politics and having an analytical bent. You can’t help but wonder why we are tying ourselves to the tracks while the train is coming and blowing its horn. Ideology is the greatest ignorance, only religion challenges it, daylight third.
We are stuffed, but somehow the stock market looks good. Beggar me.
Robert. your comment is spot on except for your last paragraph.
It would be appropriate that we acknowledge and show ourselves as nothing more than a vassal state of the US, even our recent Prime Minister declared we “are joined at the hip”!
To prosecute my case I offer the following the sources to the critical thinkers who subscribe to Crikey,
“Dangerous Allies” by Malcolm Fraser , “What Uncle Sam Wants – US Foreign Policy Objectives in Australia ans Beyond” by Clinton Fernandes and reading at the moment, “Oil Under Troubled Water” by Bernard Collaery & finding no difficulty in joining the dots!
I give evidence thus:
https://books.google.com.au/books/about/What_Uncle_Sam_Wants.html?id=f6yXDwAAQBAJ&printsec=frontcover&source=kp_read_button&redir_esc=y#v=onepage&q&f=false
Excellent Ian. Great reading references, aware of two of them, will check the third. May have more reading time on my hands in the near future.
Apart from trying to drive forward using the rear view mirror, using an out of date map of Middle Earth and trusting the most useless priests & prognosticators – economists only demonstrate how accurate astrologers are by comparison – why is anyone still pretending to pretend that the post C19 world, if any, will resemble the one now crumbling?
There has never been a better opportunity for a new social compact – it would be a sin to waste it.
Our government has acknowledged that you can’t live on the old unemployment benefit, and that it is not your fault that a job disappears, this is grounds for hope.
This says that work isn’t everything, that banks can renegotiate , that life is more important than the economy.
Materialism is nothing compared to community..
The US broke the rules of Capitalism because too few had the power to do so.
It only works with proper checks and balances and a proper tax base, we do not serve it, it serves us . The US has been so busy getting rid of both.
It may take a few years for us to get back on track but the work/ life balance has been very unhealthy for years.
Remember that the human body and mind benefits greatly by helping others, money and its role has been mercilessly abused and exaggerated in what it takes to lead a full and productive, meaningful life.
Dear Scott call in the advertisers, the marketers now and give them the the new parameters.
The new message is ‘ buy only what you need to be happy, don’t buy what you can’t afford.’
There are many more jobs that have to go because they aren’t in the interests of the people. There is plenty of work to take up the slack, help others, yourself, the environment.
Economic rationalism, the real one this time.
*brought to you via the embolden of alcohol ,[only 3 beers!]
Imagine how creative and optimistic you could be after 6!
“Our government has acknowledged that you can’t live on the old unemployment benefit, and that it is not your fault that a job disappears, this is grounds for hope.”
I think I’d rather put my faith in the Tooth Fairy.
Negative 0.3 %. I find that hard to believe, Max.
Would you believe ………. ?
The levels of denial are emperor Hirohito esque.
Or I’m living on another planet.
One or the other, I no longer understand my fellow human beings.
Missed it by that much…
See, sometimes we do understand each other!
🙂
Glad you got it beth. I’m also an out and emboldened dilettante
Very perspicacious, 99.
Tip Max’s number upside down. (As Babs could have, being much taller.)
Also won the (original) $64,000 Question on her subject of Shakespeare, in 1957, age 24.