The Economy Under COVID-19: Notes From the Trenches

There are currently two crises underway simultaneously. The advance of the novel coronavirus is taking a terrible toll in terms of physical and emotional well-being. At the same time, job losses resulting from ‘social distancing’ are sending the economy into a tailspin. To fight on both fronts, governments are advancing rescue packages of never-seen-before dimensions. Every day, the tremendous number of factors in play reconfigure in a new way. These ‘from the trenches’ notes attempt to shed some light along a murky pathway.

So many extraordinary things are happening with economic statistics these days that it’s impossible to keep track of them all ‒ says the fellow whose job it is to do just that. (Wow! I see where the foregoing both dips into self-pity and attempts to justify my failings. Oh well, I’m a frail clay pot, as they say.) Take foreign trade, for instance. For years, China has accounted for the largest portion of the U.S. trade deficit every month. Its share has usually ranged from 40% to 50%. In March of this year, however, China’s share plunged to only 20%, ‒ i.e., in other words, to only one-fifth from as much as one-half.

In March, the Euro zone supplanted China as the number one source of the U.S merchandise trade shortfall. The Euro zone’s share was 25%, or one-quarter. Furthermore, two countries took 10% each, Germany and Ireland. Germany, through sales of its motor vehicles and parts, plus precision industrial equipment, always ships more to the U.S. than it receives in return. But Ireland is a surprise. Ireland’s export sales to the U.S. are being led by pharmaceuticals and blood plasma products.

In Q1 of this year, U.S. exports to China were a chilly -15.4%, but imports were an even frostier -28.4%. Was there a trading partner with an opposite pattern? Yes, Ireland. Year to date, U.S. exports to Ireland have been +5.2%, but that’s tepid compared with the hot pace of imports coming in the opposite direction, +22.1%.

Among U.S. retail sales, there are three shopkeeper categories with big impacts on the comfort to be drawn from one’s own living space: ‘furniture and home furnishings’, ‘electronics and appliances’ and ‘building materials’ (including supplies for reno projects). In April 2020, year-over-year sales by the first two were -66.5% and -64.8% respectively. Only the third escaped the minus two-thirds curse. In fact, at +0.4% year over year, ‘building material’ sales held up nicely.

We’re in the heart of fireworks season. Thanks to the genius of their engineering, pyrotechnics nowadays can be made to appear in all sort of patterns, ‒ the outlines of a star, a heart, or a smiley face. Given the current dilemma we all find ourselves in, wouldn’t it be appropriate if the nighttime sky were to be lit up by a surgical mask? Or a pair of gloves? In my mind’s eye, I see that if proper attention is paid to the direction of high-up breezes, the gloved hands could be made to appear as if they are clapping. Or coming together to pray.

Read the previous article here: The Economy Under COVID-19: Notes from the Trenches – May 22, 2020.

Alex Carrick is Chief Economist for ConstructConnect. He has delivered presentations throughout North America on the U.S., Canadian and world construction outlooks. Mr. Carrick has been with the company since 1985. Links to his numerous articles are featured on Twitter @ConstructConnx, which has 50,000 followers.