After a harrowing April and May, the economy appears to be on a path to recovery. There were several positive pieces of economic news this week, both domestically and abroad.
First, a purchasing manager survey from IHS Markit found that output is picking up. Production still contracted, but at a slowing pace. IHS’s purchasing manager index for manufacturing was 49.6 for June, while its services index was 46.7. The composite index for the month was 46.8. A number below 50 indicates contraction, while anything above 50 indicates growth. June’s readings were the highest in four months.Output in Europe and Asia is also picking up.
Prices for raw materials, like oil, tin, and copper are gaining. Copper and tin prices improved by 15% each since the beginning of the second quarter. Notably, oil surpassed $40 per barrel after futures prices tumbled below zero in April. Commodities are particularly sensitive to changes in demand, so the gain in price suggests that consumption may be getting back on track. Last week, Commerce Department data showed retail sales rising by 18% in May, further confirmation that the economy is coming back to life.
Finally, the World Trade Organization announced this week that global trade will likely fall by 18.5% in the second quarter of 2020. On its face, that’s a pretty scary drop. It’s a vast improvement over the prediction the organization made in April. At the beginning of the second quarter, the WTO announced that global trade could fall by 13-32% in 2020. Now trade only has to grow by 2.5% for each of the two remaining quarters to reach the optimistic end of that prediction, the organization pointed out on Tuesday.
‘The fall in trade we are now seeing is historically large – in fact, it would be the steepest on record. But there is an important silver lining here: it could have been much worse,’ explained WTO director-general Roberto Azevedo.