Another 5% global contraction coming in Q2

A host of global indicators are showing the devastating effects of the coronavirus and related containment measures on the world economy. The global services PMI dropped to its lowest level on record in March and such qualitative surveys are probably not even capturing the full extent of the damage. High streets have emptied and leisure activities such as cinema and restaurant visits have ground to a halt. The evidence on world trade and manufacturing is not quite as bad, but both seem set to suffer more in the months ahead. We have pencilled in falls in Q2 GDP of as much as 20% q/q in some advanced economies. A rebound in China will only partly offset these falls, so global GDP should still fall by around 5% in the second quarter, similar to the Q1 drop we have estimated. Activity should recover elsewhere later this year as containment measures are eased. But early evidence of a surge in unemployment in many economies is a warning that incomes and demand are likely to remain somewhat depressed for a long time to come.