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Leading Economies Collapse in April, with Exceptions of China and South Korea

April 23, 2020 (EIRNS)—The condition of the economies of leading industrial nations is, at least for this month, that of the depth of the Great Depression.

The surveys of purchasing managers in industry and service companies, generally published in coordinated fashion in the fourth week of the month, are being released today as “purchasing managers’ indices.” All, with two exceptions, are in by far the deepest contraction ever seen in these surveys. The European Purchasing Managers’ Index (PMI) for industry, on which below 50 indicates contraction, was at 33.6 in the third week of April; for services, it was at 11.7—even in March still having been 23.6. The composite (industry plus services) PMI for Japan fell to 27.5. The Markit composite PMI for the United States dropped to 31, with manufacturing at 36.9 and services at 27.4. China’s composite PMI, however, rose sharply from March to reach 46.9 in April. South Korea’s composite PMI was actually slightly expansionary in April, at 50.2.

In the United States, 4,427,000 new claims for unemployment were filed as of April 22. Accounting for revisions of previous weeks, 26.6 million new claims were filed in five weeks. Even assuming that some (very) few have found new jobs, this in itself represents 16% unemployment. Real unemployment is likely 25% (some 40 million) as of mid-April—again, not including about 3.5 million long-term dropouts from the labor force. Overall, fewer Americans are employed now than at the end of 2009 after a full year of uninterrupted mass layoffs. When they might “return to work” is an unanswerable question; it should be: Where can they be mobilized under a new paradigm?

The global oversupply of oil, relative to current demand, is estimated to be growing at about 25 million barrels each day, 750 million barrels of unused oil over the next month. No country has thus far been willing and/or able to reduce its production by more than a couple of million barrels per day. So while last week’s “negative oil price” was an artifact of speculation and one very large U.S. storage hub being full, in about a month world storage will be full; the only remaining storage will be on tankers, and they will all be full soon after. The price of oil has been levered back up to below $20 by 1) proposals to have the Federal Reserve loan oil companies money to shut in production; and 2) heightened U.S.-Iran tension, which may have been created for that purpose. The price will decline further, and world oil production may again become concentrated in the Persian Gulf kingdoms and sheikhdoms which alone can sustain production at that level.

U.S. home sales were down −9.5% from the previous year, and that was only in March. U.S. auto sales fell −31% from the prior year in March and are at about −38% down in April.

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