The first business surveys about this economic depression appear

This morning has seen the first actual signals of the scale of the economic slow down going on. One of the problems with official economic data is the  time lag before we get it and this has been exacerbated by the fact that this has been an economic contraction on speed ( LSD). By the time they tell us how bad it has been we may be in quite a different world! It is always a battle between accuracy and timeliness for economic data. Thus eyes will have turned to the business surveys released this morning.

Do ya do ya do ya do ya
Ooh I’m looking for clues
Ooh I’m looking for clues
Ooh I’m looking for clues ( Robert Palmer)


The main series began in Japan earlier and brace yourselves.

#Japan‘s economic downturn deepens drastically in March, dragged down by a sharp contraction in the service sector, according to #PMI data as #coronavirus outbreak led to plummeting tourism, event cancellations and supply chain disruptions. ( IHS Markit )

The composite output index was at 35.8 which indicates an annualised fall in GDP ( Gross Domestic Product) approaching 8% should it continue. There was a split between manufacturing ( 44.8) and services ( 32.7) but not the way we have got used to. The manufacturing number was the worst since April 2009 and the services one was the worst since the series began in 2007.


Next in the series came La Belle France and we needed to brace ourselves even more.

March Flash France PMI suggest GDP is collapsing at an annualised rate approaching double digits, with the Composite Output PMI at an all-time low of 30.2 (51.9 – Feb). Both services and manufacturers recorded extreme drops in output on the month.

There was more to come.

French private sector activity contracted at the
sharpest rate in nearly 22 years of data collection
during March, amid widespread business closures
due to the coronavirus outbreak.

There are obvious fears about employment and hence unemployment.

Amid falling new orders, private sector firms cut
their staff numbers for the first time in nearly threeand-a-half years during March. Moreover, the rate
of reduction was the quickest since April 2013.

I also noted this as I have my concerns about inflation as the Ivory Towers work themselves into deflation mode one more time.

Despite weaker demand conditions, supply
shortages drove input prices higher in March…….with
manufacturers raising output prices for the first time
in three months

We could see disinflation in some areas with sharp inflation in others.


Next up was Germany and by now investors were in the brace position.

The headline Flash Germany
Composite PMI Output Index plunged from 50.7 in
February to 37.2, its lowest since February 2009.
The preliminary data were based on responses
collected between March 12-23.

This led to this analysis.

“The unprecedented collapse in the PMI
underscores how Germany is headed for recession,
and a steep one at that. The March data are
indicative of GDP falling at a quarterly rate of
around 2%, and the escalation of measures to
contain the virus outbreak mean we should be
braced for the downturn to further intensify in the
second quarter.”

You may be thinking that this is better than the ones above but there is a catch. Regular readers will recall that due to a problem in the way it looks at supply this series has inflated the German manufacturing data. This has happened again.

The headline Flash Germany
Manufacturing PMI sank to 45.7, though it was
supported somewhat by a further increase in
supplier delivery times – the most marked since
July 2018 – and a noticeably slower fall in stocks of
purchases, both linked to supply-side disruption

So the truth is that the German numbers are closer to France once we allow for this. We also see the first signals of trouble in the labour markets.

After increasing – albeit marginally – in each of the
previous four months, employment across
Germany’s private sector returned to contraction in
March. The decline was the steepest since May
2009 and was underpinned by similarly sharp drops
in workforce numbers across both manufacturing
and services.

Also we note a continuing pattern where services are being hit much harder than manufacturing, Of course manufacturing had seen a rough 2019 but services have essentially plunged at a rapid rate.

The Euro Area

We do not get much individual detail but you can see that the other Euro area nations are doing even worse.

The rest of the euro area reported an even
steeper decline than seen in both France and
Germany, led by comfortably the sharpest fall in
service sector activity ever recorded, though
manufacturing output also shrank at the steepest
rate for almost 11 years.

I am trying hard to think of PMI numbers in the 20s I have seen before.

Flash Eurozone Services PMI Activity Index(2)
at 28.4 (52.6 in February). Record low (since
July 1998)

Putting it all together we get this.

The March PMI is indicative of GDP slumping at a
quarterly rate of around 2%,

The UK

Our numbers turned up to a similar drum beat and bass line.

At 37.1 in March, down from 53.0 in February, the seasonally adjusted IHS Markit / CIPS Flash UK Composite Output Index – which is based on approximately 85% of usual monthly replies – signalled the fastest downturn in private sector business activity since the series began in January 1998. The prior low of 38.1 was seen in November 2008.

This was supported by the manufacturing PMI being at 48 but it looks as though we have at least some of the issues at play in the German number too.

Longer suppliers’ delivery times are typically seen as an
advance indicator of rising demand for raw materials and
therefore have a positive influence on the Manufacturing PMI index.

The numbers added to the household finances one from IHS Markit yesterday.

UK consumers are already feeling the financial pinch of
coronavirus, according to the IHS Markit UK Household Finance Index. With the country on the brink of lockdown during the survey collection dates (12-17 March), surveyed households reported the largest degree of pessimism towards job security in over eight years,
with those employed in entertainment and manufacturing sectors deeming their jobs to be at the most risk.


So we have the first inklings of what is taking place in the world economy and we can add it to the 40.7 released by Australia yesterday. However we need a note of caution as these numbers have had troubles before and the issue over the treatment of suppliers delivery times is an issue right now. Also it does not appear to matter if your PMI is 30 or 37 we seem to get told this.

The March PMI is indicative of GDP slumping at a
quarterly rate of around 2%,

Now I am slightly exaggerating because they have said 1.5% to 2% for the UK but if we are there then France and the Euro area must be more like 3% and maybe worse if the series is to be consistent.

Next I thought I would give you some number-crunching from Japan.

TOKYO (Reuters) – The Bank of Japan on Tuesday acknowledged unrealized losses of 2-3 trillion yen ($18-$27 billion) on its holdings of exchange-traded funds (ETFs) after a rout in Japanese stock prices, raising the prospect it could post an annual loss this year.

Our To Infinity! And Beyond! Theme has been in play for The Tokyo Whale and the emphasis is mine.

Its stock purchase started at a pace of one trillion yen per year in 2013 when the Nikkei was around 12,000. The buying expanded to 3 trillion yen in 2014 and to 6 trillion yen in 2016, ostensibly to boost economic growth and lift inflation, but many investors view the policy as direct intervention to prop up share prices.

Surely not! But the taxpayer may be about to get a warning of sorts.

The unrealized loss of 2-3 trillion yen would wipe out about 1.7 trillion yen of recurring profits the BOJ is estimated to make this year from interest payments on its massive bond holdings, said Hiroshi Ugai, senior economist at J.P. Morgan.

For today that will be on the back burner as the Nikkei 225 equity index rose 7% to just above 18,000 which means that its purchases of over 200 billion Yen yesterday will be onside at least as we note the “clip size” has nearly trebled for The Tokyo Whale.



28 thoughts on “The first business surveys about this economic depression appear

  1. Hello Shaun,

    re: “direct intervention to prop up share prices.”

    well I’ve always posit that the CB are fearful of a 1930’s style depression and that they viewed it a an asset price problem, ergo they will move heaven and earth to shore up asset prices .

    so I’ll guess that I will be finding out 😉


    • Markets are bouncing today, but markets like shares don’t go down in a straight line without a few bumps and rises on the way.

      Its like being on life support or seeing someone dying you sometimes get that last gasp of air!

      The self employed the next to get help, the government could be looking at a number of options from 75% to 80% of a self employed previous tax returns based upon 3 years of business.

      So for all those businesses who have cooked the books and not declared all their income the last three years, their standards of living will be falling.

      The UK in lock-down for 3 weeks but lets face it by then it may be the high of the crisis so the lock-down will probably going to go on for much longer.

      To be quite frank about all this the world economies are not going to bounce back to where they were prior to the outbreak and could take years to recover imo.

      Not heard anything from Greta Thunderberg lately, the coronavirus has beaten her to the line in getting the world population to reduce their carbon footprint !

      The current situation far worse imo than the financial crisis, which was warned could happen again and no one knows quite how bad it will really get. The government is on a war footing and its not surprising, the current situation is biblical in its enormity.

      • The hysteria is beyond biblical in its enormity.

        The actions of western totalitarian govts is biblical and extraordinarily frightening in its enormity, but no real surprise when looking at how they’ve turned the “western free world” into an extreme version of 1984 over the last 3 decades.

        Really is worrying for me the way the people are so accepting and unquestioning of our continually deceitful govt. when they have next to no data on the numbers with this virus as they’ve not been doing mass testing of the people … merely testing a selection of people who come into hospital with flu like symptoms.

        Yet they manage to close the entire economy down and destroy the lives of vast swathes of people who are clearly not be returning to work. Now i know many of these jobs would have gone in what was the impending economic bust, but at least they’d be given a fighting chance of surviving if the economy wasn’t shutdown.

        • Arthur,

          I am surprised the supermarkets not pushing forward with the technology/robots in this crisis in order to protect their staff from coronavirus.

          The technology was there to scan a full trolley load of shopping years ago and this is the time to roll it out.

          The world will never be the same again, India now locking down 1.5 billion will hiut their economy as well, but lets face it both India and China manufacture a lot of clothes and they aren’t needed in any event now as most countries closing all their clothes shops.

          Strange how there has been so many complaints about too many cheap clothes and it damaging our envireoment and it all comes to a stop without Greta Thunberg, nature has sorted the matter far quicker than she has been able to do.

          • The world will never be the same again as powerful global governments have seen how easy they can shut the entire system down, print trillions of £$Y€, despite having next to no data other than what some teacher at Imperial college has come up with on his laptop stating its going to kill hundreds of thousands of Brits.

            I truly am utterly amazed how easy it was for them to do this and without a questioning voice to be heard in the MSM. This way is much easier than having a deflationary bust leading to a depression that out globalist and neoliberal leaders have caused; leaving them with no excuse and having to apologise for 4 decades of economic and social destruction of western society.

        • “when they have next to no data on the numbers with this virus as they’ve not been doing mass testing of the people … merely testing a selection of people who come into hospital with flu like symptoms.”

          They love their focus groups.

          • Yes the new type of focus group, where one view is given to them and they have to agree. The old style focus groups where differing views were sought thought are too much hassle!

    • As I have said before, even the pond life in financial services (the bimbo is giving me the silent treatment, which is nice on my ears) have to take courses in regulation, where it is mentioned that manipulation of the market is a criminal offence – unless you sit at the top of the pile.

  2. Shaun,
    Latest Wolf St blog highlighting use of Special Purpose Vehicles by US FED to bailout the economy & continue the socialising of losses from “asset” purchases.

    • Hi Chris

      Yes that was a change driven by the fact that the US Fed wanted to buy stuff it could not, a bit like the Maiden Lane portfolio if I remember correctly, For those wondering about this here is the original statement from the US Fed.

      “Under the TALF, the Federal Reserve will lend on a non-recourse basis to holders of certain AAA-rated ABS backed by newly and recently originated consumer and small business loans. The Federal Reserve will lend an amount equal to the market value of the ABS less a haircut and will be secured at all times by the ABS. Treasury, using the ESF, will also make an equity investment in the SPV established by the Federal Reserve for this facility. The TALF, PMCCF and SMCCF are established by the Federal Reserve under the authority of Section 13(3) of the Federal Reserve Act, with approval of the Treasury Secretary.”

      For me though there was only one SPV

  3. Greetings from house arrest in Occitanie. Its difficult to know what is happening locally now we are excluded from going out of our gate for more than 1Km and/or an hour if its vital like shopping to eat. Yesterday ‘we’ ( that was illegal, all these new restrictions have been made law) went to the local leclerc supermarche, armed with two attestations. Compared to press coverage of the UK it was still a civilized experience. Everyone waiting in line, 2 meters apart ( sans baskets), to be let in to collect sanitised baskets. The Thai experience was for the guy/gal organising entry would have a contactless thermometer and ask peoplle not to enter who had raised temperatures. We thought this was an opportunity missed. No shortages of anything inside, however fresh veg/fruit has inflated by 20% in a week. No visible gendarmerie presence in our local town at all, so no checks to navigate.
    Since we have been back we have been serviced by a local builder finishing a small job, and the oil boiler serviced again by a local business. We have also had both cars serviced by the local mechanic. I have no reason to believe they are not still in business , albeit now with income supported by the state.
    Delivery guys are obviously ‘disposable’, because there is thriving activity in on-line orders and home delivery. I ordered something from ( .fr did not have it) and it was delivered within 48 hours ( not prime).
    Hope this anecdotal info is of some interest.
    By the way France has now approved the use of chloroquine on the most serious cases. It is expected to widen the use after the current 2 week trials are completed.

    • Hi JimW

      Things are improving here as my local Tesco has put boxes on the floor so people know where to queue and had sanitiser and cleaning clothes for the baskets and trolleys. It did not have any skimmed milk so I went to the Co-op which seemed a bit of a melee so I left it and went back later, But in general there is food there albeit some seem to be unaware of what is happening, Exercise is fine and I would have been well within the French rule as I did a circuit in the park this evening. Behaviour there was much better.

      The Tube seems to have been a disaster and I feel sorry for anyone using it.

  4. Great blog as usual, Shaun.
    You may be interested in knowing what the economic data looked like in Ontario when our province was hit by the SARS epidemic. There was no recession in Canada at that time, because the virus was pretty much confined to Ontario, but there certainly was a recession in Ontario. The Ontario Economic Accounts show these quarter-to-quarter growth rates for real GDP by industry for 2002Q4 to 2003Q4: 0.7%, 0.5%, -0.3%, -0.5% and 0.8%. The SARS epidemic actually started in February but only reduced the positive growth rate in 2003Q1. (I am using what seem to me to be the more plausible quarterly growth rates for GDP by industry because the otherwise similar GDP by expenditure estimates show a pickup in growth in 2003Q1, which seems unlikely.) The growth rate in 2003Q2 was also influenced by an electricity blackout in August, but the decline is still mainly due to SARS. This was pretty much a classic V-shaped recession, and is probably the best outcome that most advanced countries can wish for from this COVID-19 pandemic.
    Ian Birrell (“China is not the hero in this darkest hour”) has noted the SARS coronavirus, like COVID-19, arose in a Chinese wet market. In this case, it was in Gangzhou in 2002. “A review of studies into the outbreak published in 2007 by four Hong Kong experts found horseshoe bats were a reservoir for such viruses, which were then ‘amplified’ by civets. ‘The culture of eating exotic animals is a time bomb,’ they concluded.” Indeed. It is really time that the PRC cracked down on their wet markets. They aren’t nearly as spicy as a wet T-shirt contest. They are simply a threat to world health and the world economy.

    • re ” They aren’t nearly as spicy as a wet T-shirt contest. ”

      ugh! images of mark carney in a wet T-shirt – PURGE ! PURGE !

      “….. simply a threat to world health and the world economy. ”

      will someone PLEASE make sure Mark does not buy any T-shirts……..



  5. Hello Shaun,

    re ” The BBC is determined to do all it can to raise a smile and keep the country entertained during these testing times. ”

    oh god, they’d be better off showing the test card……


    • Raise a smile? Well, they have slowed Eastenders!

      But wait: “The One Show will Remain at the heart of National life” – okay we are truly f*cked now.

  6. Interesting that construction workers are exempt – why might that be? We might imagine that combined with yet more funny money, they have a lot of overpriced land with cupboards on it to sell…..

  7. The UK property market is now going into a standstill, as estate agents also told they have to close shops and the agents wont be able to show prospective clients around under lock-down for fear of cross contamination:

    Are property prices the next to fall ?

    Maybe not at the moment as there will be no evictions but it may come later on when the dissaster unfolds and the realization is housing is overpriced in a low interest rate environment and the average Joe Public lifestyle a lot poorer.

    • Hi Peter

      Interesting as I passed an estate agents earlier with 2 staff in there. I was surprised at the time and I am even more so now. As to prices they will do everything they can to keep them rising, but as you say there are ch-ch-changes in the air.

  8. So they all met at Davos at the end of January.
    “So can we kick the can down the road another year?”
    “Doesn’t look like it Deutsche Bank is in deep trouble again and, try as we might, we just can’t inflate the problem away.”
    “They’ll string us up, we’ll lose all power, be exposed for charlatans, and generally pilloried. How do we avoid the blame?”

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