16th April 2020
Hugues Chevalier, Economist
After many weeks of containment and lockdown in Europe, the lifting of these measures in China and the rebound of the activity there in the main focus of many economists. Indeed, the epicentre of the pandemic has started a gradual lifting of the lockdown four weeks ago. Activity has already stabilised and even slowly rebounded according to the latest PMI indicators (50.1). Parallel indicators, such as air pollution and the level of transportation, have confirmed this. According to Vontobel bank, capacity utilisation rates in the industry have come back to almost 70%, not far from the 80% level seen before the pandemic. However, uncertainty remains important. First, the lockdown of its major export markets (USA, Europe and Japan) will affect all export industries for some months ahead. Further to this, a possible resurgence of Covid-19 in China will again affect the economy and a W style rebound could be considered. Nevertheless, Chinese consumers are back in the shops and buy again non-essential goods. Indeed, Swatch has reported a rebound of the watch sales and LVMH a level of sales higher than the 2019 average. The rebound in China foreshadows what would happen in Europe and in Switzerland. However, in the short term, a recession cannot be avoided, but a rebound will happen for sure after the lifting of the lockdown. What we do not know for Europe is how long the lockdown will last and how much time the Europeans will need to contain the pandemic.