CRU: Multi Commodity Outlook
LONDON, May 25, 2020 /PRNewswire/ -- Over Q1 2020, COVID-19 has developed from an emerging threat to a transformational reality with potentially long-lasting effects on economic growth. All optimism for commodity markets at the start of the year was quickly extinguished as the coronavirus emerged in Wuhan, China. Prices have been dragged down further by dire market fundamentals which were a result of government-imposed lockdowns in the major global economies. Both supply and demand have been lowered across the board, but demand has been harder hit and will be slower to make a recovery. Most commodities have further to fall from here. There has been a profound human cost to the pandemic and the economic fallout of governments' responses is just starting to be counted.
China's first ever quarterly GDP contraction
China's published a GDP growth rate of -6.8% y/y in Q1 2020 and -9.8% q/q. This is the first negative growth figure since the start of the economic reforms initiated by Deng Xiaoping in 1978. This number is not surprising given the lockdown brought the economy near to a standstill for almost two months. China's growth rate bears particular significance for commodity markets as its economy has come to account for roughly half of global commodity consumption and production. Furthermore, with many economies around the world still in lockdown, we are looking to China to gauge the economic cost of the COVID-19 containment. The economic repercussions will be significant.
Months of lockdown lowers global GDP
At the beginning of May, many economies were starting to lift lockdowns or at least discuss exit strategies, with the caveat that we are entering a 'new normal'. CRU is assessing the full economic impact of bringing swaths of the global economy to a standstill. Using estimates of the loss of output by sector, one month of the lockdown lowers the level of annual GDP by 2–3%. CRU is now forecasting a global recession in 2020, with growth in the Eurozone and USA turning negative, and China suffering a "hard landing", with China's economic growth slowing to just 1.6%.
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