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The Great Frost of 1709 saw temperatures drop across Europe.
In France, an estimated 600,000 people starved to death. In what became known as the Great Northern War, 2,000 Swedish troops perished from the exposure as their strongest Russian enemies huddled in their camps.
I present these historical titbits when the Governor of the Bank of England declared this week that the UK economy will suffer its worst recession in 300 years as a result of Covid-19. So you can forget your comparisons of the Great Depression.
We are at the heart of this now.
More and more indicators are explaining the magnitude of the economic damage, both here and abroad, that Covid-19 caused and the containment measures taken to address it.
In Ireland we had a record unemployment of 28.2% in April, once pandemic unemployment payments were counted. It is even worse for people ages 15-24. Unable to activate the historic Irish solution to emigration, youth unemployment has skyrocketed to 52.8%.
So-called “soft indicators” such as the purchasing manager’s index for manufacturing and services are recording record declines both in Ireland and across Europe.
These indicators record the intentions and feelings of managers in a wide range of companies. New orders are at record lows; redundancies at record levels. And companies that are still in production take longer to obtain raw materials. They are the supply chains that you may have heard of, and they are taking advantage of.
These soft indicators have a pretty good track record of predicting what really happens in economies.
Other important indicators, such as the reduction in the demand for credit from companies and personal clients that the Central Bank highlighted this week, point to an economy that is contracting at an unprecedented rate.
Interestingly, depending on what you read in the Central Bank’s statistics, it raises the question of whether the provision of additional credit through government schemes is really what companies facing a cash crisis like this really want or need.
Spending patterns provide another signal. OSC and Central Bank data showed grocery purchases off the charts, but almost everything else is on the decline. Cash is disappearing, but even when the bulge in credit and debit card usage is accounted for, the actual amounts being spent are declining.
One of the reasons, according to industry experts, is that large purchases like airline tickets and hotels account for a large portion of credit card transactions. And not much of that is happening now.
And that takes us very well to some of the most scary industry numbers. This week Ryanair released its air traffic statistics for April. The company stated that it made 600 flights in April. This included rescue and medical flights on behalf of various EU governments.
Being Ryanair, the statement noted that 99% of these flights arrived on time. The flights carried approximately 40,000 passengers. In April last year, the airline carried 13.5 million passengers. That is a 99.3% drop.
Covid-19 stirred a whirlpool that has absorbed economies around the world. If it’s the worst economic shock since the Great Frost, we can only hope that this glorious early summer weather can offer some green shoots soon.
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