COVID State of Play: Economic and Trade Data Temperature Check at the Halfway Mark
By Alice Ancona, Senior Vice President & COO, World Trade Center Miami
Midterm data is out and we took a look at what is making headlines as well as some positive trends.
Certain parts of the world are showing small signs of recovery. Asia and the Euro zone, which experienced the effects COVID-19, went into shut down and reopened before the U.S., are reporting positive factory activity. Note that PMI readings above 50 indicate expansion, while those below that signal contraction.
The Euro zone economy contracted 12% last quarter but is expected to grow 8.1% this quarter
- IHS Markit’s final Manufacturing Purchasing Managers’ Index bounced to 51.8 in July from June’s 47.4
- New order growth is outpacing production which is a positive sign for a strong August
- GDP rose by 3.2% in the second quarter from a year earlier, affirming that a V-shaped recovery may be underway in China.
- The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) for China came in at 52.8 for July.
In the U.S., the service sector lags behind manufacturing in flash July Markit PMI data.
- S. flash manufacturing purchasing managers’ index rose to 51.3 in July from 49.8 in the previous month.
- The flash services purchasing managers index rose only to 49.6 from 47.9 in June.
It’s important to remember that there are two sides to the economic equation: supply and demand.
To focus on just supply without considering demand gives us an incomplete picture. Supply generally tends to recover faster, which we are beginning to see. But demand is where the rubber meets the road. Consumption is 70% of U.S. economic activity. It’s about 60% of China’s and represents approximately 64% of the Euro zones.
Other things to look for:
- Improving consumer confidence & consumer spending
- Services recovery – a large segment of our economy (U.S. and Florida) is tied to services from lower salary jobs like hospitality & retail to higher salary jobs like finance and technology. International trade heavily depends on services, you can not export without services.
- Employment/workforce recovery
Now, let’s take a look at what’s making headlines in the U.S. and in Florida:
NATIONAL: The recession has been delayed:
In a normal recession unemployment goes up, delinquencies go up, charge-offs go up, home prices go down; none of that’s true here,” Dimon said. “Savings are up, incomes are up, home prices are up. So you will see the effect of this recession; you’re just not going to see it right away because of all the stimulus.” -Jamie Dimon, CEO of JPMorgan Chase
- The $2.2 trillion CARES Act injected billions of dollars into households and businesses, masking the impact of widespread closures.
- The range of outcomes for the country is incredibly wide, and that will directly impact households, businesses and ultimately, investors.
- Read more here
*As of the publication of this article, Congress had not passed another stimulus package.
Here is a snapshot of the situation in Florida:
“Floridians are more pessimistic in July, anticipating a longer economic recovery. Most of the pessimism comes from the overall expectations about the outlook of U.S. economic conditions in the short- and long-run. With an economy largely depending on tourism and a lack of steady flow of tourists, the labor market is poised for a long recovery.”
Hector H. Sandoval, director of the Economic Analysis Program at UF’s Bureau of Economic and Business Research.
Destinations Florida, the statewide association that serves local tourism promotion organizations, recently reported that the tourism industry is beginning to show some positive signs of improvement in employment and hotel occupancy rate which translates to increase revenue.
- Tourism employee layoffs were at their peak in mid-March at 67% and are now down to 17% in June.
- As of June 9, 55% of respondents had hired or rehired employees.
- Hotel occupancy was down 71% in mid-April and is now down to 35% in June
- On June 9, 2019, hotel occupancy was at 78% compared to 43% on June 9, 2020
Read the study here.
Now for a quick snapshot of Florida Trade data.
We will be doing a more in-depth report for our Newsletter which comes out on August 20th. Be sure to sign up in the form at the bottom of this page.
- In Q1 there was a -2.09% decline in value in Florida origin exports and a -.60% decline in imports. Certain commodities have done well, others have been hard hit.
- As of April, there was a -10% (-$1.9B YTD) decline in value in Florida origin exports and a -9.07% (-$2.47B YTD) decline in imports.
- In May, there was a -16.11% (-$3.8B YTD) decline in value in Florida origin exports and a –13.16% (-$4.6B YTD) decline in imports.
- NEW — In June, there was a -18.35% (-$5.11B YTD) decline in value in Florida origin exports and a –12.75% (-$5.3B YTD) decline in imports.
But big concerns still loom.
As indicated earlier, Florida is the top travel tourism destination in the world. Tourism drives the economy more than it does for any other state.
- 1 million are employed in tourism
- 3 million have jobs related to the tourism industry
- Visitor spend was $94B in 2019
Other top sectors the state depends on are below and these still have some ways to go to show that things are moving in a positive direction:
- International Trade
- Aviation & Aerospace
- Life Sciences
While we are beginning to see some positive signs, it is still to soon to tell if we are on the path to economic recovery.
Click here to download the 12-page report “COVID State of Play: Economic and Trade Data Temperature Check at the Halfway Mark”