Global Economics Intelligence executive summary, August 2020

Over July and August, the global economy stirred. Retail sales improved, manufacturing revived, and trade began to recover. The revived activity comes close on the heels of a punishing second quarter. Most pandemic restrictions were in their fullest form then, and most economies measured large contractions in GDP, including –9.5% in the United States and –15.0% in the eurozone (year-over-year). China experienced its contraction (–6.8%) in the first quarter, and has since returned to growth.

As restrictions are lifted, countries in diverse regions are joining China and other Asia–Pacific economies in recovery. Demand and output are still below marks achieved in 2019, but an awakening has clearly begun. It comes at a cost, however. In many places the public-health emergency has not receded, and the virus continues to spread. Virus levels are high and even accelerating in India, Brazil, and other populous Latin American countries, as well as in parts of the United States.

In the consumer sector, global and country consumer-sentiment surveys conducted for July by the Organization of Economic Cooperation and Development (OECD) were steady and nearly positive, with outlooks approaching long-term norms. Retail sales returned to growth on an annual basis—if slower than in pre-COVID-19 times–in Brazil, the US, and the eurozone. Sales contractions in China and Russia have steadily become smaller.

Global purchasing managers’ indexes (PMIs) for July indicate slight near-term expansion in manufacturing and the services sector, at 50.3 and 50.5, respectively. Manufacturing PMIs for individual economies also show expansion for the most part, with record growth recorded in Brazil; the indicator dropped further into contraction in India and Russia, however (Exhibit 1). The service PMIs mainly showed expansion in July, with marked gains in the eurozone and Russia; the indicator remains well in contraction territory in Brazil and India, however.

Manufacturing purchasing managers’ indexes for individual economies mainly showed expansion, with record growth in Brazil; indicators dropped further into contraction for India and Russia.

Trade is clearly rebounding: the CPB World Trade Monitor registered month-on-month growth of 7.6% in June (Exhibit 2). Imports and exports increased in most surveyed economies on a monthly basis. The Container Throughput Index increased to 111.5 points in June (107.7 in May, 107.8 in April); revived activity in Chinese ports is the main factor in the recovery in container traffic (which is still 4.3% below levels of one year ago).

Globally, trade remains far below precrisis levels but is clearly rebounding; the CPB World Trade Monitor grew by 7.6% in June, month over month.

In the United States, the unemployment rate has steadily improved, to 8.4% in August, from 10.2% in July and 11.1% in June. Filings for unemployment benefits remained high, however, at more than one million per week through mid-August (Exhibit 3). In the eurozone, unemployment ticked up, to 7.9% in July (7.7% in June).

Unemployment in the United States remains high.

Consumer inflation picked up in the US but remained subdued in the eurozone; in emerging economies, inflation has been gradually accelerating for consumers while remaining subdued for producers. Only in Brazil has producer-price inflation been rising as well. Food prices increased globally in August, but while they remain relatively low overall, in some locales, notably India, food prices have climbed markedly.

Commodity prices increased but remain relatively low. With improving Chinese demand, prices for industrial metals are rising. Oil prices are slowly reviving as demand returns and Organization of the Petroleum Exporting Countries (OPEC) production limits are maintained; in late August, the Brent price was $45.

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Inflation expectations remain low despite recent increases in the 5-year and 10-year TIPS spread. Equity markets have been climbing globally since April; performance was mixed in July but broadly positive in August. In the US, the Dow Jones Industrial Average has recovered all pandemic-triggered losses and the S&P 500 is at a record-high level (Exhibit 4). Gold rose above $2,000 per ounce in early August but has slightly retreated since then. The US dollar continued to depreciate against a majority of currencies in August.

Equity markets have mainly posted steady gains since April; performance was mixed in July and largely positive in August.

Debt markets (10-year government bonds) remained calm in July and August, following recent trends. The central banks of Russia and Brazil cut key interest rates by 25 basis points, to 4.25% and 2.0%, respectively.

Most business analysts and economists have commented on the extraordinary rise in public debt amid the COVID-19 crisis. Large stimulus packages are sustaining economies through the crisis, and many argue that more stimulus still is needed. The low-interest-rate environment has made higher debt levels potentially manageable, but the International Monetary Fund and other institutions have sounded warnings that the growing burden will also slow recovery, especially in low-income countries.

McKinsey’s Global Economics Intelligence (GEI) provides macroeconomic data and analysis of the world economy. Each full monthly release includes an executive summary on global critical trends and risks as well as focused insights on the latest national and regional developments. View the full report for August 2020 here and here. Detailed visualized data for the global economy, with focused reports on selected individual economies, are also provided as PDF downloads on The reports are available free to email subscribers and through the McKinsey Insights app. To add a name to our subscriber list, click here. GEI is a joint project of McKinsey’s Strategy & Corporate Finance Practice and the McKinsey Global Institute.

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