Economics of lockdown, and how a country’s future is impacted
The global
overview – OECD wrecked by an overreaction
The economic disaster lockdowns rendered on especially the SME sector
has been well documented, and now we are about to enter another seasonal flu
season in the northern hemisphere, it is timely to look at how the global
dynamic is as of early September (note maps below represent spot comparison to
Feb 2020 levels, so not strictly seasonally adjusted. However, a general
picture is still useful for plotting investment moves ahead.
The level of domestic transport is a generic proxy so we will start with
this – what seems obvious is the strong growth in Africa (Figure 1), up
>20% generally and some >50% - whereas similar geographic regions of S
America (very much under the radar screen of media) and SE Asia (also keen
followers of Western policies) have fallen significantly by similar extents,
showing how policy orientation so dramatically affects local livelihood:
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Figure 1:
Transport proxy – Africa booming, Five Eyes decimated, SEA collapsed, Greece
up  |
Looking by sector, retail and F&B saw strong rises in Africa and The Middle East, but SEA and Oceania are completely wiped out (Figure 2),
and on the more wide economic indicator of workplace visitation levels (Figure
3), S America is up (seasonality?) and Africa is also up, while most of the
rest of the world is suffering – again most in the 5-Eyes nations and SE
Asia(!):
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Figure 2:
F&B and retail – Africa up, 5-eyes down – SEA bad
Figure 3: office work – S America back up with Africa, RoW destroyed  |
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Comparing cities –
HK is almost back to normal, NZ worst hit
Looking at global cities, despite the early draconian shutdown (which is
still very restricted on an international level), HK has shown the best recovery
in both domestic transport (Chart 1) and office work resumption (Chart
2), both almost back to pre-lockdown levels.
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Chart 1: transport
in Greece helped by summer crowds, HK best amongst gateway cities Chart 2: office work – NZ trashed, London & NYC both still well down |
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The fervent lockdown efforts of other gateway cities have all left their
economies much worse, with Australia (Chart 1) and NZ (Chart 2)
prime examples. We put in Sweden as a good benchmark for a jurisdiction which
generally pursued an open economy approach throughout the global lockdown craze
– but even there it is down by roughly 20% on both measures.
Singapore’s ‘living with the flu’ policy needs more determination if it
is not to be rattled by the odd data point that knocks it off its course of
recovery.
HK vs SGP – HK win
Between the two Asian dragons, SGP should have taken the growth crown
given its tropical (ie less flu prone) geography and distance from China the perceived source of the flu, but sadly early policy was too influenced by the
bad judgment in the West and it as a result ended up worse off when HK came
back strongly in the past year.
HK is now pretty much back to pre-lockdown levels on all measures (Chart
3) park visitation being the only exception (?!), whereas SGP is down
double digits still in both its consumption and transport activities (Chart
4), which is sad and unnecessary:
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Chart 3: HK:
work, retail, and transport back to normal  Chart 4: SGP: work up (surprise) despite transport & retail down double digits still  |
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NYC & London
the ugly sisters?
While Asia is more or less back to normal, the former kings and queens
of NYC and London seem still badly impacted – as shown by the severe drop in
work and transport sectors (compare annotation numbers in Charts 5 & 6
vs Charts 3 & 4). Seems most of the people are spending time in the
parks (or is it gardens? This is despite seasonality reasons due to the
northern summer) instead of at their desks:
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Chart 5: NYC:
work and transport decimated, everyone hangs out in the parks?  Chart 6: London: same as NYC, the retail sector also killed  |
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New Fear capitals
of the world – Melbourne
Just when you think London/New York are badly hurt enough, wait till you
see the damage done to Melbourne, which has probably the most strict curfews
seen around the world (fully reflected in the complete decimation of local
economic activities: where even residential activities remain down 80% when all
over the world they have been up, Chart 7), followed closely by
Auckland, where the government shut down the entire country on one single
positive test result (Chart 8) – where was any symptoms, hospitalisation,
let alone death? Principles of proportionality seem to be truly out of the window when politicians get their hands on absolute power.
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Chart 7: Melbourne
– the lockdown capital of the world…?  Chart 8: Auckland: killing the whole economy for 1 single positive test?  |
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So whereto can one
flee from these prisons of extremes?
Many people must be thinking about how to escape the extreme shutdowns,
be it for economic, health (!), or philosophical reasons – such a trend has
indeed been in full swing in the US where people are escaping CA/NY and headed
to FL/TX. In our Australian example above, Perth has had little to no draconian
shutdowns throughout the crisis (although recent trends are not promising, see Chart
9), further helped by a nascent bull market in the commodities sector to
which the region is heavily exposed.
It is little surprise therefore to see the Perth economy on a much surer
footing, as evidenced by CBD office occupancies – down 6ppts from pre-lockdown
levels having bounced back from end-20 lows (Chart 10).
This is in strong contrast to Melbourne’s 68ppt drop in CBD office
occupancy to 26% in Jun-21 - the
implications of this exodus on future higher debts/taxes cannot be ignored – for
those with Aussie exposures, it is certainly time you sold Melbourne and bought
Perth.
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Chart 9: Perth
nearly normal except retail/recreation, work just below normal for a year
too  Chart 10: Melbourne wiped out, Perth closest to full recovery vs pre-lockdowns  |
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