Economics: Record declines throughout 2Q20 data
The economic news released in July depicted a profound deterioration of the economy and projects obstacles to an effective recovery of key economic sectors in the coming months. Preliminary data shows a double-digit contraction in GDP during the second quarter, the deepest on record, with the pandemic’s impact on aggregate demand components and the lack of a governmental response for mitigating the fall largely explaining the dimensions of the 2Q20 results. During that same period, industrial activity experienced an even sharper decline while services and the primary sector also ended in the red.
The Global Economic Activity Index for May painted a similarly troubling picture, including record declines in secondary and tertiary activity. Private expenditure essentially fell off a cliff in April, with the worst result in the history of this indicator following a relatively minor decrease in March. The automotive industry reported less dire results for June that it had for the previous two months, but declines in production, exports and domestic sales were all roughly 30% to 40% below levels of a year earlier. Further aggravating the outlook, public finance results for the second quarter show a major fall in tax collections and continuing weakness in spending despite a considerable increase in public physical investment at the end of the quarter.
The gravity of these numbers lead us to make further adjustments to our 2020-2021 outlook, as have major multilateral institutions and analysts in general.
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