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PAR 14:45:19 GMT - 04/09/2020

By Paul Donovan How much will GDP fall? ▪ Economics is not a precise science. Economists use decimal points in their forecasts to show they have a sense of humor. Economic data is almost impossible to survey in a lockdown. But we do need to find out how much economies are slowing. ▪ A good rule of thumb is that every month of lockdown will cut a country's GDP by 2% to 3% each month. ▪ About 60% of what people spend will not change or will rise in a lockdown (e.g. food at home). If we cut spending on three quarters of everything else we buy, that is close to 2% of GDP every month. ▪ Shutting down parts of an economy in the summer is quite normal in France or the Nordic region. Large parts of these economies close for four to six weeks. Before seasonal adjustments, these shutdowns cause private sector GDP falls of 1.5% to 3.5% over the summer. ▪ The International Labour Organisation estimates global hours worked will fall by a very precise 6.7% in the second quarter. Hours worked are not quite the same as GDP. Some workers do more in an hour than others. However, that fits with lockdowns cutting GDP by 2% to 3% a month.