“To become an extremist, hang around with people you agree with.”             Cass Sunstein

The curtailment of human activity as society attempts to contain the spread of the COVID-19 pandemic has had a much larger and less familiar impact on the services sectors in economies (as opposed to manufacturing production and global trade sectors that usually bear the brunt of economic downturns). The collapse to virtually zero for cinema attendance, restaurant bookings and use of public transport across the world has been severe.

The closing of internal and external country borders has also been evident for flight numbers, which (according to FlightRadar24) collapsed by 71% between mid-February and early April. However, as BCA Research highlights in our chart today, recorded flights are turning around through May, rising by 162% from mid-April to 21 May. As BCA notes, this will clearly overstate the true pick-up, as flights will be running with sharply reduced capacity.

Still, it is indicative of the piecemeal opening of economies around the world and easing of lockdown restrictions. Restaurant bookings and traffic congestion is also on the rise. It increasingly suggests the low point for global growth was buried deep in the middle of Q2 2020. If this continues it will lend further support to the optimism for recovery that has built through May, underpinning risk assets, such as equities and oil prices.

Clearly still ultra-low global bond yields and support for the gold price and the US dollar suggest many investors are, as yet, unconvinced that recovery is coming (albeit we would still argue it’s the odds-on favourite—even if it is more U-shaped than V-shaped). There are risks about. Emerging markets, such as Brazil, Russia and India, increasingly look troublesome in terms of the rapid rise of new COVID-19 cases, low testing and more limited social distancing regimes. An emerging market human catastrophe could become a global issue and renewed rapidly rising plane travel may intensify that issue elsewhere. Trump’s approaching election and penchant to distract with another trade war could also pose a risk, and one that’s hard to predict.

Global flight numbers improving sharply

Source: Fightradar24.

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