Signs of recovery, but…

All data point to a marked recovery. This has begun with confidence indices in May. It continues with credit, electricity consumption, and capacity utilization data in June.

If we judge by electricity consumption for instance, and look at long-term data, the pattern seems to be gross of a V-shaped recovery. Same with CUR and credit data as well.

CUR is below the pre-pandemic level, but it has been improving over May and June. Consumer durables jumped from 45.3 to 62.6. Investment goods stand at 67 up from 51.4 in April.

Real sector confidence is up from 73.5 in May to 89.8 in June. The through was 62.3 in April. Consumer confidence is at 62.8, the highest since the 64.5 peak of April 2019.

Electricity consumption has also posted an improvement, and from previous decelerations we can infer the pattern is the same. Even so it will possibly stay subpar for a while.

The graphics visually depict a V-shaped recovery, like in previous cases. The problem isn’t with the current shape though. It all depends on the second wave and on the exchange rate.

The likely V-shaped recovery is rather normal after a partial lockdown. Yet it is predicated upon credit, and credit alone. The same considerations apply to housing also.

The rapid comeback may come to a halt come September, or it may continue. Still the Q2 contraction is likely to be less severe than envisioned, probably in the order of 8%.