The Covid recession isn’t even over yet, but there is already talk of a double dip coming.
1. Back-to-back, the NBER is likely to call it one big recession. Europe may call it two.
2. Short-term, I expect more silly US decoupling theories.
3. Some claim the US recession is already over. If so, it was the most uneven recovery in history. t.co/UKgvB4ikJo
— Mike “Mish” Shedlock (@MishGEA) October 22, 2020
Sharp Contraction in France
Flash France PMI data pointed to a sharper contraction in private sector activity during October. Anecdotal evidence indicated that the decline was driven by the recent surge in positive COVID-19 cases. Read more: t.co/L2rapX3etf pic.twitter.com/ivpxeg7sYz
— IHS Markit PMI™ (@IHSMarkitPMI) October 23, 2020
Eastern Europe Covid Deaths
The Covid numbers coming out of Eastern Europe in this autumn wave are staggering. Here’s Poland and Ukraine, reported cases and deaths. pic.twitter.com/bXm79oJLjS
— Ben Hunt (@EpsilonTheory) October 22, 2020
Furloughed Job Disguise
Furloughed Jobs Disguise The Eurozone Employment Crisis –t.co/62C016H4DG
— Daniel Lacalle (@dlacalle_IA) October 22, 2020
No Trade Deal
EU Mistakes Increase the Odds of No Trade Deal@dlacalle_IA
If the EU makes another mistake, there will not be a deal, even if both sides want one.
If there is no deal, both sides will suffer, with Germany taking the biggest hit to exports.t.co/ntwQB4D2LB
— Mike “Mish” Shedlock (@MishGEA) October 21, 2020
Yes, Deaths are a Problem
For those that keep demanding the death chart. Here it is for Western Europe.
June 19 and May 25 were correction to the data. Yesterday was the highest deaths, and the first day over 1,000, since mid-May. (Peak was 5k on April 7)
— Jim Bianco (@biancoresearch) October 21, 2020
Due to another Covid surge in Europe and the US, the odds of a double-dip recession (or a delay in the current one ending) have increased.
Europe is also at risk from a collapse in a trade deal between the UK and EU following Brexit.
First Things First
Before you can have a double-dip recession, the current one has to end first.
And that largely depends on how one measures it.
Europe vs the US
European countries typically use a simple rule. Two consecutive quarters of contraction marks a recession.
In the US, the NBER can declare a recession even before there is one quarter of contraction. It did so in February of this year.
I have seen claims the US recession is over already. But the recovery is so uneven I doubt the NBER (the official arbiter of recessions in the US), would see it that way. But perhaps they do.
In Europe, countries may very well declare a recession is over as soon as there is a single quarter of growth.
Whether or not there is a double-dip may be in the eyes of the beholder.
Flash PMI Signals Renewed Economic Downturn
Business activity fell back into decline across the eurozone in October as accelerating growth of manufacturing output was overwhelmed by a steepening deterioration in the service sector amid rising COVID-19 worries.
Germany was the only bright spot, as France and the rest of the region as a whole fell deeper into decline. The rate of job losses eased, but forward -looking indicators deteriorated: inflows of new business showed a renewed decline and business optimism for the year ahead slipped to the lowest since May.
Deflationary pressures meanwhile eased as business costs rose at a faster rate. The flash IHS Markit Eurozone Composite PMI fell for a third consecutive month in October, dropping from to 50.4 in September to 49.4 to register the first contraction of business activity since June
US Recession Over?
Some claim the US recession is already over. If so, it was the most uneven recovery in history.
An L-, K-, or W-shaped recovery isn’t much of a recovery whether or not there is a double dip.
For further discussion, please see It’s Professionals vs Everyone Else in the K-Shaped Recovery