Global Economic Barometers signal start of recovery

"The continuation of this recovery may be hindered by the high level of uncertainty about a possible worsening of the pandemic due to the reopening process itself,” said FGV IBRE researcher Paulo Picchetti.
Economics
13 July 2020
Global Economic Barometers signal start of recovery

FGV IBRE’s Coincident and Leading Global Economic Barometers rose for the second consecutive time in July, signaling a gradual recovery in the global economy. Although the numbers are starting to distance themselves from the worst moment of the crisis, the situation is still highly uncertain in terms of both the economy and health.

The Coincident Global Barometer has increased 22.6 points so far in July, compared to the previous month, from 50.4 points to 73.0 points. Meanwhile, the Leading Global Barometer rose 23.7 points, from 45.7 points to 69.3 points. Both indicators benefited from an improved economic environment in the three surveyed regions. The Asia, Pacific and Africa region made the biggest contribution to the rise in the coincident indicator, while the Western Hemisphere was the main driver for the leading indicator.

“Growth in the leading and coincident global barometers in July has been widespread, across all regions and sectors, in line with the main indicators related to the level of economic activity in the vast majority of countries. At least for now, the effect of the resumption of productive processes and services on expectations is clearly positive, driven by a series of stimulus measures adopted by national governments. However, the continuation of this recovery may be hindered by the high level of uncertainty about a possible worsening of the pandemic due to the reopening process itself,” said FGV IBRE researcher Paulo Picchetti.

Coincident Barometer – regions and sectors

In June and July, the Coincident Barometer has recovered 58% of the losses recorded from March to May. The biggest contribution to the increase of 22.6 points in July came from the Asia, Pacific and Africa region (12.9 points). The second largest contribution, 7.1 points, came from the Western Hemisphere (North America, Latin America and the Caribbean). Europe contributed 2.6 points to the overall result. The graph in the press release shows each region’s contribution to the Coincident Barometer in relation to its long-term average level of 100 points.

In sector terms, July was the first month since the beginning of the pandemic in which all sectors improved. In July, the biggest contributor to the rise in the Coincident Global Barometer was once again industry, followed by the Overall Economic Development indicator (a set of variables reflecting the evolution of economies at a more aggregate level). Services, trade and construction made a modest contribution to the result.

Leading Barometer – regions and sectors

The Leading Global Barometer anticipates global growth rate cycles between three and six months ahead. All regions contributed to the indicator’s rise in July, above all the Western Hemisphere, which accounted for almost 60% of it. Increased optimism about the economic recovery led the region’s indicator to contribute 14.0 points to the Leading Barometer’s increase of 23.7 points in July. The European Leading Barometer contributed 8.9 points to the global indicator, while the Asia, Pacific and Africa region contributed 0.8 points, possibly reflecting concerns about a potential second wave of COVID-19.

All sector indicators had a positive effect on the Leading Barometer’s result, especially the variables linked to Overall Economic Development. Industry had the second greatest influence, while the other sectors contributed less.

The complete study is available here.