Our global growth numbers remain well above consensus because we think too many forecasters are extrapolating too much from past cycles. Most recent recessions have resulted from asset price busts and other financial shocks, whose negative effects on output took time to develop and even more time to unwind. By contrast, the 2020 slump resulted from a health crisis, whose negative effect on output was huge and immediate but also quickly reversible. Some sectors that largely shut down in the spring lockdowns – eg auto manufacturing – have learned to keep producing even in a virus-ridden environment. Other sectors that remain depressed for now – eg travel and entertainment – are likely to rebound sharply once enough people are vaccinated. This is likely to trigger renewed upgrades in consensus growth forecasts:
2. We are not there yet, as the virus outbreaks of the past few months are likely to keep global growth soft for a while longer. Europe is probably through the worst at this point, as the infection surge of Sep/Oct has abated (although we still think that GDP in Q4 as a whole will contract significantly in most European countries). By contrast, the situation has yet to stabilise in the US. While new cases, positivity rates, and hospitalisations have started to decline in the hard-hit
This is overly simplistic in our view given the extreme levels of private debt and papered-over insolvency that have come of the crisis but that is not relevant so long as the rules of capitalism are suspended, so we agree until that context changes.