Financial Times Article “The Chinese Covid outbreak related to the Delta variant puts pressure on the economy” (Hale, White, Shepherd) made some serious readings, and several other articles took a similar view, citing Goldman Sachs. I was attracted by a sense of deja vu. In my first speech in January 2020, I mentioned the uncertainty of the trade/macroeconomic outlook given the events in Wuhan. From the Financial Times:
Goldman Sachs lowered its forecast for real GDP growth in the third quarter from the previous 5.8% to 2.3%.
These two charts provide some insights into the basis of these revisions. The first shows the degree to which the economy is locked up according to different measures.
source: GS, “Effective Lock-in Index: Updated on August 10.” Note: Data from Oxford University Goldman Sachs Global Investment Research Center (covidtracker.bsg.ox.ac.uk), Google LLC “Google COVID-19 Community Mobility Report” .
The second picture is Goldman Sachs’ estimate of the drag on China’s economy (and other economies).
source: GS, “Effective Locking Index: Updated on August 10.”
The worrying statement is contained in Associated Press article:
“The right question everyone, including financial market participants, should ask is when other economies will be blocked,” Carl B. Weinberg of High Frequency Economics said in a report. “This is the worst nightmare of a central bank governor come true.”
This is a worrying issue because the vaccination rate in some East Asian economies is not high.
source: Financial Times, Visited on August 10, 2021.
For Jeff Frankel’s foresight assessment in February 2020, please see here. When I was still worried about the supply chain effect, I wrote this postal In mid-February.
