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Japan says that economic conditions are ‘severe’, worst view in nearly 7 years

  
Analysis, Economy

Japan downgrades its economic assessment for the month of March

Japan
  • Sees economy in a ‘severe situation, extremely depressed by the coronavirus’
  • First time removing the word ‘recovering’ since July 2013
  • Conditions likely to remain severe due to the influence of the disease
  • Economy is worsening at a pace comparable to when the 2011 earthquake struck
  • And towards levels last seen during the collapse of Lehman Brothers in 2008
  • The damage is as bad as those two events put together
The prior assessment can be found here. This doesn’t come as a surprise as we are seeing an unprecedented decline in economic sentiment and real conditions across the globe.
Expect this view to stay the course so long as the virus outbreak continues to keep the world in lockdown mode, with Japan also on the verge of starting their own.

German parliament backs EU750B crisis spending package

  
Analysis, Economy
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That’s a big number

Germany’s parliament approved aid for smaller firms and the self-employed. It includes a 156B euro supplementary budget.
That’s a huge number. Germany’s GDP is one-fifth of the US which just unveiled an enormous $2 trillion package. In relative terms, this is much bigger. That said, the details matter. Parts of both programs are loan guarantees and those don’t necessarily cost anything because they will be paid back.

Goldman Sachs expects global real GDP to contract by about 1% this year

  
Analysis, Economy

The firm continues with the doom and gloom scenario

  • Expects real GDP in advanced economies to contract very sharply in Q2
  • That includes a 24% drop in the US
  • Based on partial count of state releases, estimates that 2.25 million Americans filed an initial jobless claim last week
We’ve heard these predictions previously here and here during the course of the week. But make no doubt, the jobless claims report this week is going to be a real shocker.
The peak during the 2008-09 crisis was 665K and the release this time around should comfortably exceed that with expectations to double at the very least.
US

Japanese business sentiment has fallen to a decade low (Reuters Tankan)

  
Analysis, Economy
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Bad data from the March survey, which is not surprising. ‘Highlights’ via Reuters report:

  • manufacturers’ sentiment index -20 vs Feb -5
  • Service-sector index -10 in March vs +15 in Feb
  • Manufacturers mood down ahead, service-sector flat
souring business mood could derail capital spending
All manufacturers across industries were pessimistic about business conditions,
Among service sector firms, no firms except those in real estate/construction and information/communications were optimistic.
Most of the companies expressed fears of the virus’ impact on their business, on top of already weak consumer spending due to an October sales tax hike and sluggish global demand aggravated by the U.S.-China trade war.
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Reuters poll of 501 large- and mid-sized nonfinancial companies, of which 242 firms responded
Bank of Japan’s tankan quarterly survey is due April 1

China data – huge collapse in industrial production, retail sales, jump in unemployment

  
Analysis, Economy

January-February combined industrial output down 13.5% y/y (vs. expected -3%)

  • Jan-Feb combined retails sales down 20.5% y/y (expected -4%)
  • Fixed investment down 24.5% y/y for the combined two months, expected -2%
A heads up of what is to come around the globe? Hubei, the epicentre of the cov1 COVID-19 outbreak is a critical manufacturing centre in China. Perhaps other countries will not take so hard a hit, but those that have been slow in response are going to get it the worst.
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