Economies revving up recovery from coronavirus should expect many detours

Governments and central banks’ commitment to nurse the global economy back to health is reassuring, but the virus won’t be so quickly tamed

Sectors which can operate with some social distancing policies are likely to do better than industries heavily reliant on the free flow of people

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A worker in a face mask takes orders from motorists in the drive-through lane at a burger restaurant on July 1 in Los Angeles, California. California governor Gavin Newsom has ordered indoor dining restaurants to close again for at least three weeks amid a surge in new coronavirus cases. Photo: AFP

Published: 9:00pm, 3 Jul 2020Updated: 10:22pm, 3 Jul 2020

A new economic and market cycle has begun as the world tries to rebound from the short-lived but brutal Covid-19 recession. However, this is no ordinary recovery.

Pent-up demand and a desire for expansion are at odds with the scary possibility of a virus resurgence, something we are sadly seeing in the US as cases there spike in many states. That makes for wildly disparate predictions for a post-coronavirus world.

To gain some clarity on what lies ahead, we can start by assessing the roller-coaster journey of the first half of the year. Clearly no one could have predicted that the global economy would have been brought to a virtual standstill by a global pandemic, or even that we would so quickly be back to where we are now in terms of global markets and investor sentiment.

The swings in economic data over the past few months have created some remarkable statistics. For example, the US unemployment rate went from a 51-year low (3.5 per cent) in February to a 72-year high (14.7 per cent) just two months later. Even more astounding is that as the unemployment rate surged to multi-decade highs, the US S&P 500 market returned 20 per cent in the second quarter and climbed back to over 3,000 points.

Global policymakers rode to a quick and concerted rescue with virtually endless support measures, creating a more resilient market by absorbing and cushioning economic loss. The commitment from governments and central banks should not be underestimated and they clearly stand ready to do more if required.

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