Try Alphabet Soup to size up the recovering economy!
Nobody truly knows what direction the U.S economy will move post shutdown, but I do like the reference to Alphabet Soup, makes it sound much like child's play, laid out for us in visual terms we can all understand and relate to.
We all know that the 1st and 2nd quarters of 2020 is anything but glorious for most. However, we should start to see if and how the stimulus payments assisted the economy as planned.
According to Carsten Brzeski, who is the global head of macro at ING Research, that it is quite difficult to forecast the outlook noting that pre-virus the economy was booming and suddenly it ceases to exist. "Reuters" recently polled 50 economists and the opinions varied sharply.
Some suggest the world economy may decline as much as 6% in 2020 and others went as far to say that we could see growth by as much as 0.7%. Below are a few of the visuals that were used to offer a peek at historical recovery scenarios. Though we have never experienced anything of this magnitude in my lifetime, I am rooting for the 'V" recovery!
1. The best case scenario would be the "V" shaped recovery, which means as fast as we fell we rise just as quickly.
2. The "U" shaped recovery takes more a few quarters to recover. The results of the lockdown will linger for a while as easing lockdown measures will be gradual and social distancing will continue, which will continue to impact the tourist industry.
3. Dubbed the "double-dip" is the "W" shaped recovery, this is the more likely scenario. When activity increases but
unemployment and corporate bankruptcies start coming through. This could also be the scenario if new cases of the virus start appearing which has happened in some countries.
4. The "L" shaped recovery is when growth declines and does not recover
for a good amount of time.
This outcome is a big risk for markets
not able to benefit from large stimuli and are dependent upon commodity exports.
Finally comes the "SWOOSH"! No visual needed!
5. "SWOOSH" refers to a tick mark-style profile that implies a deep downturn and a gradual recovery as lockdowns are lifted at a pace less than they were imposed.
"AXA Investment Managers group chief economist Gilles Moec pictures a “swoosh” shape akin to the Nike sports brand logo.
“With consumer spending possibly impaired by a higher propensity to save and serious potential curbs on investment, we think the likeliest scenario is for the world economy’s rebound post lockdown to be quite soft,” Moec said.
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Source: Berenberg economist Florian Hense
Source:Reporting by Dhara Ranasinghe;
Source:Additional reporting by Karin Strohecker; Graphics by Ritvik Carvalho; Editing by Sujata Rao and Susan Fenton.