Insight

A Bridge Past COVID-19 UPDATE: Charting the Economic Cliff

KPMG reviews the path for the economy from the impact of COVID-19.

Constance L  Hunter

Constance L Hunter

Chief Economist, KPMG US

+1 212-954-3396

UPDATED April 17, 2020

Please download the latest chart book, A Bridge Past COVID-19 UPDATE: Charting The Economic Cliff.

As COVID-19 spreads across the globe, successive countries—78% of the world—have engaged in varying degrees of social distancing.

The consequences have been swift with job losses already dwarfing what was seen during the Global Financial Crisis. As a result, in Q2 we expect to see losses of at least 25 million jobs.

The strength of the recovery is dependent on several things any one of which is beneficial; all of which are better when combined:

  • The ability to flatten the curve and return the healthcare system to normal functioning (via more effective treatment protocol, widely deployed)
  • Widespread testing and contact tracing (regular testing of symptomatic and asymptomatic populations)
  • Better knowledge and proven efficacy of serologic treatment (immunity passports)
  • A vaccine and the ability to administer it to all regardless of health insurance  coverage status

KPMG’s Office of the Chief Economist is continuously monitoring key developments in this unprecedented situation and refinements to the economic model occur daily. To learn about our current scenario analysis, including deep background on the underlying cause and effect dynamics, please download our latest report, A Bridge Past COVID-19 UPDATE: Charting The Economic Cliff.

Due to the rapidly evolving nature of this situation, we update our analysis frequently. Please check back often for our latest report.

Research highlights 

Explore key findings from our latest economic analysis

COVID-19 shows up in high frequency PMI data

COVID-19 shows up in high frequency PMI data

  • The PMIs are the most comprehensive high-frequency data.
  • The virus outbreak has disrupted manufacturing supply chains and sharply curtailed energy and commodity demand.
  • Shown on the left is the services PMI data, which helps quantify the magnitude of the destruction of discretionary spending.
  • Sweden is engaged in a modified social distancing protocol which will be interesting to watch from both a health and economic perspective.
COVID-19 shows up in high frequency PMI data

U.S. GDP expected to fall off a cliff and slowly climb back

U.S. GDP expected to fall off a cliff and slowly climb back

  • Most OECD countries report GDP on a q/q seasonally adjusted annualized (SAAR) basis in order to capture the trends in the growth rate.
  • A sudden shock such as COVID-19 is not a trending situation and therefore the annualized fall in GDP can obfuscate the path of growth firms experience in the economy.
  • For this reason, we show GDP q/q SAAR in the bars as well as on a year-over-year basis via the line on the graph.
  • While quarterly rebound is expected, on a SAAR basis in 2020, it will take until 2021 to show growth.
U.S. GDP expected to fall off a cliff and slowly climb back

Up to 40% of U.S. households will be financially strapped

  • Out-of-pocket expenses for COVID-19 treatment and hospital stays can be substantial, a hardship for 40% of U.S. adults, as can other unexpected expenses that may arise due to the Great Lockdown.
  • 24% of U.S. workers do not have paid sick leave. This population is likely to be most economically vulnerable to social distancing requirements. 
  • 9.4% of Americans do not have health insurance. Not only will this population be adversely impacted but it could hamper efforts to reduce disease spread if ill people do not seek care or get tested.
Up to 40% of U.S. households will be financially strapped

 

Related content

 

COVID-19 Reaction, Resilience, Recovery, New Reality

Visit the COVID-19 resource center for analysis, insights and perspectives across industries and business functions.

 

COVID-19 resource center