How do we read the economic indicators after the pandemic?

A year ago, with COVID-19 spreading rapidly, much of the population was forced into lockdown. The economic effects were immediately felt, causing a colossal collapse of GDP. To this day, the pandemic and the economic crisis continue and it is worth asking: Are the economic indicators really reliable? Do they show a true recovery?

March 2020 will turn to the pages of history books as a particularly unfortunate month in the economic and health aspects. Economic activity came to a sudden halt and GDP suffered a disaster that had not been seen for a long time. The IMF estimated that the world economy fell 4.4%, making it the worst economic slump since the difficult 1930s.

Countries like Spain even registered the largest drop in GDP since the Civil War, while the coup in Latin America was felt with a 7.7% drop in GDP, the largest drop in the area in 120 years. In this bleak scenario of economic depression, only China saw the light at the end of the tunnel, growing by 2.3% in the past year.

Hopeful or misleading data?

Despite everything, the IMF estimates that the world economy will grow by 5.2% in 2021. Now, will this economic growth be enough? Is it a hopeful figure? Is the world moving in the right direction? Will this figure allow us to generate employment and bring us closer to the levels of economic activity prior to the pandemic?

The economic setback has been so accentuated that comparing the economic indicators of 2021 with those of 2020 would not provide a real image that would allow us to speak of economic recovery. Therefore, to assess whether the world is really moving towards recovery, it would be better to compare the 2021 data with the pre-pandemic economic indicators.

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Although the February 2020 records may have some usefulness, since economic activity was flowing normally, March and April 2020 could be classified as dubious references. In both months, the fall in GDP is so exorbitant that any comparison with the present 2021 would not provide a correct image of reality. We would therefore be facing a terribly inaccurate photograph of the current economic outlook, insufficient to assess whether we are returning to pre-pandemic levels.

To understand the progressive evolution of the economy, rather than going back to 2020, there are those who argue that it is best to compare the growth data month by month or quarter by quarter. In this way, it could be determined which months would represent a true turning point for GDP. Likewise, it would be very useful to have some records prior to the pandemic that serve as a reference, which mark the macroeconomic objectives to be achieved by the countries.

Comparisons do not only affect figures such as GDP. Variations from 2020 in consumption data or car sales could be misleading, as, at that point, only essential stores remained open. The economy was experiencing what we know as a «supply shock».

In the coming months, economic records will easily surpass the terrible data obtained in 2020. We are talking about percentage increases that, at first glance, are spectacular, but let’s not forget that the world population was going through a historical economic collapse, from which, with contractions of up to 11%, we will not recover with 5%, however beneficial it is.

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Will the world economy reboot?

As we previously indicated, the IMF was forecasting world economic growth of 5.2%. However, although an economic power of the Chinese entity has already resumed the path of growth, the recovery will be uneven. And it is that, in those countries whose economies depend to a great extent on the service sector, the recovery will advance at a slower speed, as is the case of Spain, Italy and Great Britain. Well, it should be noted, not even China, with growth higher than the rest, had registered such a slight growth when we look at its recent history.

Likewise, GDP is not the only indicator when analyzing the economic health of a country. The unemployment rate is also a good indicator of the prosperity of a nation. Take the case of the United States, the country with the most COVID-19 infections. In April of last year, with the first wave of the pandemic, unemployment stood at 14.7%, while in February 2021 unemployment fell to 6.7%. At first glance, they seem good data, however, there is still a long way to go until it returns to the 4.4% unemployment that the United States registered in March 2020.

Another example that reinforces the idea of ​​a recovery that seems complex is Spain, a country in which hospitality and tourism have a great weight. Thus, in February 2020, before the outbreak of the pandemic, the unemployment rate was 13.6%. Thus, unemployment in Spain has been suffering ups and downs, reaching 16% in January 2021 (without accounting for ERTEs), which indicates that there is still much to be done in the face of economic recovery.

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Other indicators

The pandemic has also had a severe impact on the tourism sector. Tourist accommodation reservations can also provide certain indications about the good or bad performance of an economy. Along these lines, it seems not very encouraging that, after the catastrophic 2020, tourism and international travel will not recover until 2025.

Nor should we forget indicators such as the industrial production index, which measures the activity of the different industrial areas of a country. Guided by this indicator, the most developed economies (Europe, the United States, Japan) saw industrial activity fall that they do not finish recovering in the present 2021.

Another piece of information that economists tend to pay attention to is vehicle registration. It is usually an indicator that provides enough clues regarding the good or bad economic health of a country. Although, neither the variations in car sales invite us to think about the recovery in places like the United States and Europe.

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