The UK Economy Is Dying Under The Coronavirus Closedown

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1900

We’re going to have to end this lockdown of the UK economy and sooner rather than later. Yes, this will mean more people will die. Probably. We’re still going to have to do it:

Flash UK Composite Output Index
Apr: 12.9, survey-record low (Mar final: 36.0)

Flash UK Services Business Activity Index
Apr: 12.3, survey-record low (Mar final: 34.5)

Flash UK Manufacturing Output Index
Apr: 16.6, survey-record low (Mar final: 43.9)

Flash UK Manufacturing PMI
Apr: 32.9, survey-record low (Mar final: 47.8)

To explain all of this.

Everything that is made is made of something. Every business, every activity, does need supplies, after all. We’d like to gain an idea of what output – the things made – is going to be next month. Or at least to be able to peer a little into the future. At which point, why not go around and ask all the people who buy things for things to be made from what they’re buying?

The things to be made next month are so out of things bought this month. Thus we survey purchasing managers to see what they’re buying. We set it to an index. If they’re buying more, indicating that output will be up next month, then that’s a number over 50. If they’re buying less then that’s one below 50. Our index now tells us whether output is going to expand or contract in the next economic period.

We do this for services, for manufacturing, add them together to make the composite. Further, when we’ve got about 85% of the responses we do a quick calculation to give us the “Flash” number.

Above 60 is boom time, below 40 is a definite recession a’comin’. 12? That’s “where in buggery has the economy gone?”-time.

This tracks GDP pretty well over time. The advantage of the PMI being that we get the number in advance of it happening, GDP we tot up a month and more after it has happened.

So, what’s this telling us? That the lockdown is killing the economy. OK, perhaps we knew that and perhaps we weren’t thinking very much about it. But it is so. What it’s also telling us is that we’re going to have to end that lockdown sooner rather than later. Yep, more people will die.

Do not, though, think this is about money.

This is not to make the mistake of claiming that money, share prices and asset values outweigh lives. Rather, it’s to point that GDP is the sum of economic activity, production, incomes and consumption. If that falls 15% that means we are are all significantly poorer – and that poverty will kill people as surely as the virus is doing.

Now, the direct and immediate effect of recessions on the death rate is up for debate. Evidence suggests, however, that suicide rates rise, and birth weights drop leading to higher infant mortality. On the flipside, people drive less, leading to fewer accidents overall, (even if rates per mile remain static). The rate of industrial accidents also falls – perhaps because those in the most dangerous jobs are often the first to get laid off. It’s clearly extremely to work out precisely what causes what, and people can disagree about the balance of these effects.

But this isn’t even the important underlying question anyway. To use the language of economics, the task of public policy is to maximise human utility over time. That’s why we bear costs now in order to mitigate or eliminate the effects of future climate change.

Our aim is to maximise aggregate human utility over time. Making us all as poor as church mice in order to extend the lives of a few thousands of nursing home inhabitants by 6 months – or perhaps until the next ‘flu season – does not do this. Therefore we should stop doing it.

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john77
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john77

If these are purchasing indices then they will reflect the differences between requirements for next month’s production and stocks in hand so they will overstate the drop in production [if you maintain two weeks’ stock and production rates halve then old stock will last four weeks so you only need to buy what was, at old rates, one week’s stock this month in order to have two week’s stock at the lower rate, some people will buy that, others will hold off buying for a fortnight waiting for prices to fall] So the numbers indicate a fall but do not… Read more »

Spike
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Spike

Yes,it should reopen; not “safely,” immediately and fully. And yes, contagion and death rates will rise. Now, how does government respond when the opposition, and its allied trolls in the press corps, accuse it of being personally responsible for individual deaths? (“Blood on Trump’s hands” “What do you say to the victim’s survivors?”) And how does a country survive when such power, including power to shut the country down over a fallacious analogy, resides in a city where half the population wants the other half to fail even if the economy does too?

voster
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voster

You can’t ignore the legitimate concerns as “trolling”. Overloading healthcare capacity when Covid-19 patients occupy it similarly costs lives. It puts health workers at a larger risk and harming this section of the population has costs further down the line (losing a significant chunk of your doctors and nurses and healthcare assistants to the illness permanently or for long periods of time is not great for the healthcare system). Plus, why should they bear the disproportionate amount of the cost? At present, even the the logistics of burying all the dead cannot cope with the higher number of deaths. Your… Read more »

Spike
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Spike

Our institutions exist to serve us, not we them. The “concerns” would be “legitimate” if Covid were the plague. It is not, and the “epidemiology” was predictions by computer models that were neither public nor peer-reviewed. Your take is that the people need you to protect them, so you are more important than the public. My comment is not “endangered,” least of all by not being vetted by bureaucrats.

Most of the audience at Presidential press conferences are indeed trolls. Some are combatants and saboteurs. None are there to elicit information (that is, practice journalism).

voster
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voster

“Your take is that the people need you to protect them, so you are more important than the public.” That’s not my take at all, and neither is possible that logically extrapolate from anything I’ve said. “The “concerns” would be “legitimate” if Covid were the plague.” Bollocks. The concerns are legitimate if the effects of unmitigated spread costs more than mitigation. As cases were spiking and threatening the healthcare system’s capacity, it was highly legitimate. Experts on healthcare broadly agree, and that’s the best opinion we can go by. “the “epidemiology” was predictions by computer models that were neither public… Read more »

Leo Savantt
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Leo Savantt

It not a given that ending the lock down will cause more deaths, it might cause more deaths in the short term, but in the long term it might very well have the opposite effect.

The government’s original strategy of not locking down was possibly the right approach, however irresistible political pressure forced a change of policy and we shall never know.

What we do know is that wealth inculcates health, best get the economy back on track a.s.a.p.

Phoenix44
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Phoenix44

I’m pretty convinced the virus had run its course before the lockdown and is now running itself down, as all such viruses do. What the actual CFR is we will probably not know for a few years, once the wholly useless data we have now is made useable. My bet is a medium flu but with some wrinkles around age, ACE2 inhibitors, overuse of ventilators, underuse of other treatments, a proportion being simply normal deaths that tested positive and some that are little more than a two week bring forward.

AndyM
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AndyM

I just want to know what the original (Ferguson?) model said about these things – what weight did it put on the deaths etc from the shutdown. What did the government have in front of the when they decided – or do we have to wait for the 30 year rule to elapse, by which time – guess what – people like me will be dead!

dodgy geezer
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dodgy geezer

“….We’re going to have to end this lockdown of the UK economy and sooner rather than later. Yes, this will mean more people will die….” Possibly. And then again, possibly not. I have tracked this epidemic solely through the PHE Total Mortality figures. In the absence of any practical tracking, number of cases or number of positive infections are almost random numbers. What is showing at the moment is that the deaths per week are similar to a medium-to-bad flu epidemic, but have ramped up much faster, and will probably ramp down in a similar rapid fashion. So total deaths… Read more »

Spike
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Spike

If you suffer under the same scheme as the US, where CDC requires every gunshot victim and cocaine overdose with Covid in the blood to be a “death from Covid,” and Congress pays hospitals a subsidy based on those reports, the ratio might be less than 3:1.

voster
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voster

Any evidence of this? Can’t find any myself.

voster
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voster

“An interesting item arose in this last week – week 16 of 2020. Excess deaths above normal were quoted as around 8000, while total death certificates mentioning Covid-19 were around 6000. So, what has caused the 2000 ‘extra’ deaths? ”

The nearly 8000 figure is NOT excess deaths above normal (which is a different definition altogether, following EuroMomo). That number is how much it’s above the 5-year average, which means seasonal variations are still not taken into account.

Inferring conclusions with exact precision from provisional data is always a dangerous game.

Jim
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Jim

“The nearly 8000 figure is NOT excess deaths above normal (which is a different definition altogether, following EuroMomo). That number is how much it’s above the 5-year average, which means seasonal variations are still not taken into account.” Incorrect. The 8000 excess weekly deaths number is compared to the 5 year weekly death average, not the average for the entire year. Ie the average death rate for the week 15 over the last 5 years is X, this years value for week 15 is X+8000. So it is indeed 8000 excess deaths ‘for this week of the year’. See the… Read more »

voster
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voster

“Incorrect. The 8000 excess weekly deaths number is compared to the 5 year weekly death average, not the average for the entire year.” I stand corrected, sorry and thank you. However, this invalidates your concerns about the “extra” 2000 deaths. Look at the graph in the link you sent me – the variability of week 15 results is plus or minus 2000. That is to say, the figures used to calculate the 5-year average already contains high variability not necessarily captured by the average. As I’ve said: “inferring conclusions with exact precision from provisional data is always a dangerous game.”… Read more »

Jim
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Jim

Well its not just us contrarians who are worried about the number of deaths being caused by the NHS dropping all other balls to try and catch the CV one, there’s plenty of healthcare professionals saying exactly the same thing.

voster
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voster

Absolutely, but those same professionals are broadly supportive of the lockdown and raising these issues to ensure that those balls get picked up when they can. I don’t disagree that this is an issue, but I also don’t like people (including myself) using numbers in a way that satisfies confirmation biases.

voster
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voster

I mean, good addition to the argument, but the final bit of exaggeration is unnecessary and a strawman: “making us all as poor as church mice in order to extend the lives of a few thousands of nursing home inhabitants by 6 months”. How poor will we become is up for question. Definitely poorer, but can economies find ways to adapt to mitigate some of the effects? Who knows. Innovation will happen, though. And as for just extending lives of some old folk, well, the jury’s out on life-years lost, but at the same time, not enough of flattening the… Read more »

jgh
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jgh

And if there’s no economy, there nothing to skim off the top to feed the national religion.

voster
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voster

There’s a lot of talk about “life-years lost”, i.e. if many of the fatalities due to Covid-19 were of people who had pre-existing conditions and had a lower life expectancy anyway, then the cost of their deaths is lower than those of a “healthy” person with no underlying conditions.

Would an analogy like that apply to the economy?

Surveys of firms in January expected a contraction in the economy in 2020. Some American surveys of financial professionals expected a recession in 2021.

One might call these underlying conditions suffered by the economy. How much of the Covid crash would’ve happened even without it?