Wherever Covid goes the economy follows.
Infection rates dictate everything right now with economists watching real time data and projecting. The US economy dropped 40% with Covid. As of last week, we are back to only a 20% drop in the economy. That is a major shift, but we are still down roughly 20%.
Where are we heading and how fast?
Looking at purchase indicators from business on what businesses are buying and at what speed helps us with a 6 month predictor of where we are heading.
These numbers have been positive.
How people are feeling about spending is the largest indicator button here. This is called sentiment data. Sentiment data is showing through (Blomberg Nanos Consumer Index) that savings rates have spiked all over Western Europe, the US and Canada. It is important that we get a handle on sentiment spending because then we can foresee the flood of money coming out of savings and back into the economy all at once. This represents a very large volume of money in the world economy.
Employment and its lead time are additional factors. This time is defined as the time it takes to fill a position, from advertising for this position through the time of hire of a new individual. The numbers today are longer than they have ever been. This factors into sentiment spending as well as the point that folks do not spend money until they have secured a new job and feel confident with it.
The last indicator of where we are heading is the financial markets. We saw large shorting in the equity markets as we tumbled down. Now we are not seeing shorting of the markets. This is great news.
There is much optimism with the economy coming back and it is unclear as to exactly what the reasons are. Excess of liquidity, irrational exuberance and/ or quantitative easing (meaning how governments are controlling the monetary policy by lowering interest rates and/or dumping more money into the economy) it is hard to tell. The markets are trending upwards, and this is one of the major indicators of the return of a strong global economy.
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