Has the coronavirus-hit global economy seen the worst of the crisis? It’s too early to tell

While the stock market and business surveys point to a rebound, the improvement in economic data is rooted in the steep contractions in output earlier this year

Markets seems to be conflating the stronger-than-expected rebound with a smooth recovery

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A couple enjoy drinks at a restaurant on Ocean Drive in Miami Beach, Florida, on June 26. Patrons flocked to restaurants and entertainment venues after the state eased restrictions to curb the spread of Covid-19, but Florida is now seeing a surge in case numbers. Photo: AFP

Published: 1:00am, 10 Jul 2020Updated: 2:36am, 10 Jul 2020

Has the Covid-19-ravaged global economy turned the corner? Over the past few months, financial markets have been betting that it has as nationwide lockdowns are eased in Europe and the United States. The MSCI World Index, a gauge of stocks in advanced economies, has risen 12 per cent since mid-May, turbocharging a rally that began in late March when leading central banks launched massive stimulus measures.

Yet, signs that the world economy is over the worst of the coronavirus crisis are apparent not just in markets. Business and consumer surveys, as well as hard economic data, also point to a sharp rebound in activity.

On Monday, the publication of a gauge of global output produced by JPMorgan and IHS Markit showed that manufacturing and service-sector activity last month rose by 11.4 points, the sharpest monthly increase on record, leaving the measure at 47.7, slightly below expansion territory and up a whopping 21 points since its all-time low in April.

Other indications of a strong rebound are the July 3 publication of a survey showing that activity in China’s services industry rose in June at its fastest rate in over a decade. Even in the euro zone, where the uptick in economic activity has been weaker, retail sales increased by almost 17.8 per cent month on month in May, data from the European Union’s statistical agency, published on July 6, revealed.

Few would have predicted such a swift rebound, particularly in the case of the US labour market. In the past two months, employers have added a net 7.5 million new jobs, allowing the country to claw back just over one-third of the jobs lost since the virus-induced shutdown in March decimated the labour market overnight.

Hundreds of people line up outside a Kentucky Career Centre hoping to find assistance with their unemployment claims in Frankfort, on June 18. The US has added 7.5 million new jobs in the past two months. Photo: Reuters