Global Economic Barometers: Covid-19’s impact on international economy grows
The April edition of the Coincident and Leading Global Economic Barometers, calculated by the KOF Swiss Economic Institute and Brazilian Institute of Economics (FGV IBRE), confirms that the coronavirus pandemic has had a growing impact on the world economy. Both coincident and leading indicators have now fallen sharply for two months in a row, as the pandemic’s impact has spread beyond Asia.
The Global Coincident Barometer has fallen 8.5 points so far in April, from 77.9 to 69.4, the lowest level since May 2009, signaling a further slowdown in global growth. The Global Leading Barometer dropped 12.5 points this month, from 86.9 points in March to 74.4 points in April. The results of both indicators show that the epidemic’s spread outside Asia has caused the health crisis to jolt economies on all continents.
“The pandemic’s impact on the world economy is notable not only for its extent, but also its broad regional and sector reach. All this is unprecedented since we began calculating the Leading and Coincident Barometers. As well as these aspects, the speed of the crisis has also been remarkable, as the inflection points in the leading and coincident indicators happened at virtually the same time. This set of information shows a crisis generated by very different reasons from those responsible for recent recessions, even those that affected many countries at the same time,” says Paulo Picchetti, a researcher at FGV IBRE.
Coincident Barometer – regions and sectors
In March, the reduction in the Coincident Barometer was focused on the Asia, Pacific and Africa region, but this month, the effect spread to all other surveyed large regions. The Asia, Pacific and Africa region once more made the biggest contribution to the result, followed by the Western Hemisphere (North America, Latin America and the Caribbean) and Europe. In sector terms, the main contribution to the decline came from the set of variables reflecting the evolution of economies at a more aggregate level (General Economic Development), followed by Trade (Retail and Wholesale), Manufacturing and Services. Construction has been suffering less than other sectors, but the drop in April was larger than in the previous month.
Leading Barometer – regions and sectors
The Leading Barometer anticipates global growth cycles of between three and six months. All regions contributed to the drop in the indicator in April, especially the Western Hemisphere, followed by Asia, Pacific and Africa, and Europe. The decline was also widespread in sector terms. All sectors contributed to the drop in the Leading Barometer, particularly variables related to General Economic Development, Manufacturing, Trade and Construction. The smallest contribution, not far behind Construction, came from the Services sector, which until last month was still evolving healthily at the most aggregate level.
The complete study is available here.