LONDON—The global economy is bouncing back strongly from the
collapse it suffered in the spring, but fresh data suggest the early gains from
the lifting of coronavirus lockdowns are already exhausted, adding to evidence
that the world economy could take many months, if not years, to heal.
Fresh figures from the U.K. provide valuable insight into
the state of the continuing economic recovery. The country is one of a handful
of economies to release month-to-month figures for economic growth and is also
the largest to do so, offering a more up-to-date snapshot than quarterly gross
domestic product figures provide.
The U.K. economy grew 6.6% in July from June, having
expanded by 8.7% in that earlier month. That puts the U.K. on track for a 15%
gain in output in the third quarter, following a 20.4% drop in the second.
In recent months, economic output has plummeted and then
recovered strongly in countries that provide a monthly measure.
However, output remained 11.7% lower than it was in
February, the last month before the pandemic began to disrupt the economy.
Output in the services sector, which relies more on face-to-face contact, was
down 12.6% from February, while industrial output was down 7%.
The figures strengthen the view of many economists that a
return to pre-coronavirus levels of output will be painfully slow in most of
the rich world, as the coronavirus deters everything from travel to
entertainment to office work.
Economic data that has a good record of anticipating growth
indicates that strong growth in the third quarter will likely be followed by
more modest expansion as companies, workers and governments adjust to what
could be an extended period of uncertainty over the evolution of the pandemic
and the availability of a vaccine.
“As long as the major economies do not need to get into
generalized lockdown, the economy should continue to mend, but cannot sustain
the spectacular rebound seen upon reopening businesses a few months ago,” said
Gilles Moëc, chief economist at the Axa insurance company. “The hard part
Economists don’t expect the British economy to return to its
pre-pandemic size until 2022. The U.K. suffered the most severe decline in
output among rich countries during the second quarter, but the month-to-month
sequence of decline and recovery has been broadly similar in other countries,
including the U.S.
The Federal Reserve Bank of Atlanta estimates that the U.S.
economy is on track for an expansion of 7% in the third quarter, following a
contraction of 9.1% in the three months through June. Economists expect it to
expand by just 1.25% in the fourth quarter and to recover to pre-pandemic
output levels only in early 2022.
The global economy contracted for a second straight quarter
in the three months through June, with widespread lockdowns and individual
efforts to avoid infection dealing a severe blow to activity.
Across the Group of 20 leading economies, the 3.4% decline
in output recorded in the first three months of the year was already the
largest since records began in 1998, but the second-quarter drop was without
precedent in the decades since the end of World War II.
The turning points in activity during the pandemic have been
matters of months, not quarters. Outside China, the declines in output were
concentrated in March and April, with recoveries in many countries starting in
May and strengthening significantly in June and July as lockdowns were lifted.
According to figures released this week, Norway’s
economy—which shrank less dramatically than some of its European neighbors this
spring—expanded 1.1% in July, slower than June’s growth rate. Output in July
was just 4.7% below its February level.
In a blog post Friday, the European Central Bank’s chief
economist, Philip Lane, sounded a cautious note on Europe’s stuttering economic
recovery and weak inflation rate, leaving open the door to a fresh burst of
stimulus in the coming months.
Business surveys indicate that the global recovery continued
for a fifth straight month in August. A key measure of business activity in 45
countries, compiled by data firm IHS Markit on behalf of J.P. Morgan and based
on responses from purchasing managers, hit a seven-month high.
But there were signs of fragility as fresh outbreaks of the
virus prompted new restrictions and additional caution among consumers, with
declines in activity recorded in Japan, India, Australia, Kazakhstan, Spain and
Italy. Between them, those countries account for 15% of world output.
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