China becomes first major economy to recover from Covid-19 pandemic
But not, you know, totally.
The Chinese economy grew 4.9% between July and September, according to government data, as China becomes the first major economy to recover from the Covid-19 pandemic.
The year-on-year expansion, while slightly lower than analyst expectations, represents a dramatic reversal from the first quarter of this year when the economy shrunk by 6.8%, China’s first contraction since 1992 when officials began keeping quarterly GDP data.
China’s central bank governor Yi Gang said on Sunday that officials predict annual growth of about 2%.
As Mr. Dillow points out, the best economic forecast is usually another period of about the same. So, we’d expect China’s GDP to be about 6 or 7% larger this year than last. That it’s only 2% larger means there’s 4 or 5% gone missing.
Which seems fair enough really. Translate that over to us and that means that “recovery” would have GDP about 3% below our starting point. Maybe 4%.
This also seems fair enough.
On the basis of absolutely no science at all, just plucked from the air and gut feel, that’s also about my estimate. Absent further outbreaks and lockdowns and all that of course.
The path to this is simple enough. Close everything down, open it up again, sure, we lose production/incomes etc during the lockdown. But an economy is, to a very large extent, the knowledge of how to do stuff. And yes, some of that knowledge will be lost – scarring – just as a musician who doesn’t practice for three months. But not much and so the bounceback can be – note, can – be swift and near total. Open up again and we all get back to it, as we still remember how to do.
But then there’s stuff that we can’t do. Social distancing say. Or accelerations of changes already under way – working from home, online shopping. That’s some portion of the old economy that we’ve got to do in new ways. This takes much more time for we’ve got to go through all that boring entrepreneurs and market experimentation and so on as we figure out how to do these things. That takes the same sort of time as normal economic growth – 2 and 3% of GDP a year.
This is pulled from orifices stuff in the sense that I wouldn’t want to have to prove any of this but it’s the rough line of thinking.
Bounceback to 95% or so of February, the rest of it taking a year or two. As in China. As, actually, in current estimates for US GDP.
We’ll see how this works out, eh?