Tag: economy

By Lameez Omarjee for Fin24

Interest rates may drop further this week to levels close to those last seen in the 1970s as the Reserve Bank seeks to bolster South Africa’s ailing economy.

Economists expect a cut in borrowing costs of between 25-basis and 50 basis points this Thursday following a meeting of the bank’s monetary policy committee.

SA’s economy, which already slipped into a recession at the end of 2019, could contract by double digits this year due to the sudden halt in economy activity brought about by the nationwide lockdown to stem the spread of the coronavirus.

The Reserve Bank has already joined the world’s leading central banks in aggressively cutting interest rates and increasing bond purchases in an attempt to shore up liquidity. The Lesetja Kganyago-led bank has cut interest rates by 225 basis points so far this year, having slashed rates by 100 bps at each of the previous two meetings, taking the repurchase rate to 4.25%, its lowest level since 1973. During April it bought R11.4 billion worth of government bonds and relaxed regulations to allow banks to loan more.

A cut of 25 basis points, or 0.25% on Thursday would take SA’s repo rate to 4%, while a cut of 50 basis points would mean a rate of 3.75%. The repo rate is the benchmark interest rate at which the Reserve Bank lends money to other banks.

But to bring SA’s interest rate down to 3.14% – last seen in October 1973 as a response to the oil crisis and slowing global growth at the time – it would take a cut bigger than 100 basis points, notes economist Mike Schüssler.


Central bankers have acted in a coordinated manner in their response to the current economic crisis, following a similar course to that adopted after the 2008 global recession. The extra liquidity has served to shore up up global stock markets, with the JSE All Share some 2% firmer over the past month, and the rand managing to make some gains against the US dollar.

Kganyago has previously said that the bank would use its monetary policy tools appropriately, and within the bank’s mandate, to support SA’s economy.

Deputy Finance Minister David Masondo made waves in early May when he suggested at an ANC discussion the Reserve Bank could do more to help fund Covid-19 interventions and bolster the economy for growth by directly buying government bonds.

The Reserve Bank currently buys bonds from the secondary market, and says it only does so to remedy any market dysfunction.

The Bureau of Economic Research, in a market update, said the central bank may comment further on its bond-buying activities at this week’s MPC statement. “The bank stepped up its purchases of government bonds in April, but the MPC has so far stressed this should not be seen as quantitative easing but merely to ensure a well-functioning market,” the note read.

The BER expects a rate cut of 50 basis points on Thursday. Inflation is likely hovering near the lower end of the bank’s 3% to 6% target band, it said. At the last MPC meeting the Reserve Bank estimated it would tick in to 3.6% for April.

While the central has predicted the domestic economy will likely contract by 6.1% this year, Treasury has projected a contraction of up to 16.1% in a worse-case scenario under a protracted lockdown. Under this scenario, the employment rate would be pushed to over 50%.

Shallow rate cut

Standard Chartered expects a rate cut of 50 basis points on Thursday, bringing the repo rate to 3.75%, and a further cut of 25 basis points at the July meeting, said Razia Khan, the bank’s chief economist for Africa and the Middle East. Standard Chartered also revised its GDP outlook to a contraction of 6.5%.

Khan noted that most of the country would shift from lockdown level 4 to level 3 near the end of the month, but expects a slow recovery in economic activity in metropolitan areas, including Cape Town, which are the “epicentres” of the outbreak. “Metropolitan areas still account for a disproportionate share of South Africa’s economy. The risk is that a restrictive level4 shutdown will remain in place in metropolitan areas, where economic activity is most concentrated,” Khan said.

PwC Strategy& Africa economists Lullu Krugel and Christie Viljoen also expect a rate cut of 50 basis points.

“Given the deterioration in the economic outlook since the last monetary policy meeting – where it was conceivable that the easing of lockdown regulations would be much more accommodative from May 1 – the SARB will definitely revise its economic growth forecast to show a deeper recession this year.

“Hopefully, South Africa will get more information from the Cabinet in the coming week on the future easing of lockdown restrictions – this will directly impact the central bank’s economic forecasts,” they said.

In an EWN article last week, South African Revenue Service (SARS) commissioner Edward Kieswetter said that the number of businesses that would undergo business rescue this year would rise due to the devastating impact of the Covid-19 lockdown.

“Forty-two percent of businesses feel that they cannot operate throughout the COVID-19 pandemic, 54% of businesses feel that they will not survive between one and three months, and 46.4% of businesses have temporarily closed their doors.”

The following companies have filed for voluntary business rescue in recent times:

  • Phumelela Gaming and Leisure – on 8 May the financially distressed Phumelela entered voluntary business rescue, as the business came under severe pressure from the suspension of horse races since the implementation of the Covid-19 lockdown.
  • Afarak Mogale and Afarak South Africa – on 8 May, the alloy producer Afarak Group announced that its South African operation would be going into business rescue, citing stagnation in the economic activities, which has permeated the world economy. Afarak voluntarily filed Afarak Mogale and Afarak South Africa for a business rescue process.
  • SAA –  although the national airline was placed in voluntary business rescue in December and government announced that it would avail R4-billion to the airline to deal with its short-term liquidity problems until 31 January 2020, the Covid-19 pandemic further cemented the airline’s demise. Airlines around the world ground to a halt and the South African government denied a further funding request.
  • SA Express – on 6 February 2020, South Africa Express Airways, a state-owned airline, was placed into business rescue. In March, business rescue practitioners at SA Express said that the airline could not be saved, and moved to liquidate it.
  • Edcon – before SA moved into lockdown at the end of March, the Johannesburg-based company was already under significant strain from a series of structural changes in the retail market as well as an economy that has failed to break through the 2% growth mark for the past five years. On 29 April the 90-year-old retailer went into voluntary business rescue.
  • Comair – the airline announced on 5 May that it is unable to operate given the current coronavirus restrictions in place, and its board decided the best option to ensure the long-term survival of the company is to implement a business rescue plan. The business rescue move is designed to make the airline more “efficient, agile and customer-centric”. It reported a half-year loss of R564-million. The 19-year-old Kulula was South Africa’s first low-cost carrier.

South Africa’s Unemployment Insurance Fund has paid out just over 3.3 billion rand ($177.3 million) to people whose work and income have been affected by the coronavirus pandemic and a lockdown to curb the spread of the virus.

The fund has processed more than half the 103,000 applications that it has received from employers on behalf of about 1.75 million employees, Tourism Minister Mmamoloko Kubayi-Ngubane told reporters in a virtual briefing on Tuesday. That means that more than 862,000 people will receive their benefits. About 10,000 applications could not be processed due to errors and the affected companies have been notified to correct their applications and resubmit, she said.

The government has been criticized for inefficiency at the UIF, with the 40 billion rand set aside to compensate temporarily laid-off workers not being distributed fast enough. The fund is working to meet extra requests for assistance, Kubayi-Ngubane said.

Africa’s most-industrialized economy will implement a curfew from the start of May as it plans a limited return of its workforce into an economy that’s virtually ground to a halt due to a lockdown to curb the spread of Covid-19. This economic risk-adjustment plan spans six to eight months and the governments sees the peak of the virus curve in September, according to a statement from the Government Communication and Information Service.

The government has approved an allocation of 235 million rand to small businesses’ payroll, rental and utilities for the next three months. This funding will protect about 11,000 jobs, GCIS said.

Source: BBC

The price of US oil has turned negative for the first time in history.

That means oil producers are paying buyers to take the commodity off their hands over fears that storage capacity could run out in May.

Demand for oil has all but dried up as lockdowns across the world have kept people inside.

As a result, oil firms have resorted to renting tankers to store the surplus supply and that has forced the price of US oil into negative territory.

The price of a barrel of West Texas Intermediate (WTI), the benchmark for US oil, fell as low as minus $37.63 a barrel.

“This is off-the-charts wacky,” said Stewart Glickman, an energy equity analyst at CFRA Research. “The demand shock was so massive that it’s overwhelmed anything that people could have expected.”

The severe drop on Monday was driven in part by a technicality of the global oil market. Oil is traded on its future price and May futures contracts are due to expire on Tuesday. Traders were keen to offload those holdings to avoid having to take delivery of the oil and incur storage costs.

June prices for WTI were also down, but trading at above $20 per barrel. Meanwhile, Brent Crude – the benchmark used by Europe and the rest of the world, which is already trading based on June contracts – was also weaker, down 8.9% at less than $26 a barrel.

Mr Glickman said the historic reversal in pricing was a reminder of the strains facing the oil market and warned that June prices could also fall, if lockdowns remain in place. “I’m really not optimistic about the prospects for oil companies or oil prices,” he said.

OGUK, the business lobby for the UK’s offshore oil and gas sector, said the negative price of US oil would affect firms operating in the North Sea.

“The dynamics of this US market are different from those directly driving UK produced Brent but we will not escape the impact,” said OGUK boss Deirdre Michie.

“Ours is not just a trading market; every penny lost spells more uncertainty over jobs,” she said.

The oil industry has been struggling with both tumbling demand and in-fighting among producers about reducing output.

Earlier this month, Opec members and its allies finally agreed a record deal to slash global output by about 10%. The deal was the largest cut in oil production ever to have been agreed.

But many analysts say the cuts were not big enough to make a difference.

“It hasn’t taken long for the market to recognise that the Opec+ deal will not, in its present form, be enough to balance oil markets,” said Stephen Innes, chief global market strategist at Axicorp.

The leading exporters – Opec and allies such as Russia – have already agreed to cut production by a record amount.

In the United States and elsewhere, oil-producing businesses have made commercial decisions to cut output. But still the world has more crude oil than it can use.

And it’s not just about whether we can use it. It’s also about whether we can store it until the lockdowns are eased enough to generate some additional demand for oil products.

Capacity is filling fast on land and at sea. As that process continues it’s likely to bear down further on prices.

It will take a recovery in demand to really turn the market round and that will depend on how the health crisis unfolds.

There will be further supply cuts as private sector producers respond to the low prices, but it’s hard to see that being on a sufficient scale to have a fundamental impact on the market.

For US drivers, the decline in oil prices – which have fallen by about two-thirds since the start of the year – has had an impact at the pumps, albeit not as dramatic as Monday’s decline might suggest.

“The silver lining is, if you for various reason actually need to be on the roads, you’re filling up for far less than you would have been even four months ago,” Mr Glickman said. “The problem for most of us is even if you could fill up, where are you going to go?”

US President Donald Trump has said the government will buy oil for the country’s national reserve. But concern continues to mount that storage facilities in the US will run out of capacity, with stockpiles at Cushing, the main delivery point in the US for oil, rising almost 50% since the start of March, according to ANZ Bank.

Mr Innes said: “It’s a dump at all cost as no one, and I mean no one, wants delivery of oil with Cushing storage facilities filling by the minute.”

By Lameez Omarjee for Fin24

The economy could contract by 10% and over 1-million people could join the ranks of the unemployed due to the impact of Covid-19, according to preliminary modelling by Business For South Africa (B4SA), an alliance founded four weeks ago in response to the pandemic.

The alliance of South Africa business bodies and organisations on Tuesday morning hosted a webcast where it gave details on its support for government’s efforts to combat the impact of Covid-19 on health, the economy and labour.

Speaking during the call, B4SA’s Martin Kingston shared more on the efforts of the economic intervention working group, which expects the SA economy to only recover in 2021.

A contraction of between 8% and 10% of GDP is expected in 2020, he said. Capital flows will also be restricted for the rest of 2020, he added. “[This] will fuel the number of people joining the ranks of the unemployed,” said Kingston.

So far B4SA expects over one million people to be jobless in the aftermath of the crisis. Government’s fiscal deficit is expected to balloon to 10% of GDP. According to the February 2020 national budget, Treasury expected the deficit to be 6.8% of GDP.

B4SA has also been in regular consultation with government, particularly the National Treasury, the SA Reserve Bank and the Presidency on plans to reinvigorate the economy post the crisis.

“[They are] highly receptive to our input and the stance business has taken to provide unconditional support to the national effort to combat Covid-19,” Kingston said. Kingston said he was hopeful that the “unprecedented level of cooperation” between the parties would be sustained, beyond the crisis.

B4SA is also working with government to determine how best to lift the lockdown restrictions, specifically in critical sectors of the economy.

“We are in dynamic discussion with government on the basis of which lockdown can be released; in whole or in part, regionally, sectorally or demographically or by age,” said Kingston.

There are a number of factors being considered – sectors are being assessed in terms of their contribution to GDP employment, level of exports, risk of transmission, among other things. Kingston added that any decision regarding the lockdown will not compromise the health of South Africans.

South Africa will have to restructure its economy in response to the impact of the pandemic, Kingston explained. The economic recovery anticipated in 2021 will require “significant fiscal stimulus,” he said.

In the interim, support must be provided to small and medium enterprises and larger companies who might face a liquidity crisis.

“We are in discussion with Treasury and the Reserve Bank on what structures are appropriate,” he said.

One such a financial support mechanism is available through the Unemployment Insurance Fund, which has made available a new benefit to employees during this time. The structure of the benefit was finalised last week through a process which involved discussions at National Economic Development and Labour Council (Nedlac), said B4SA’s Robert Legh.

When asked on B4SA’s views on an income or welfare grant for people to support their families, Legh said that the alliance was supportive of such a scheme and even tabled a proposal to Nedlac on this. “It is an affordability issue. The question is for Treasury to start answering on that one,” said Legh.

B4SA also pointed out that the Solidarity Fund established by government, and which already has raised R2.2 billion will also be used to support communities in distress.

Reserve Bank cuts repo rate to 4.25%

By Ray White for EWN

The South African Reserve Bank (SARB) has announced an emergency cut of the repo rate by another 100 basis points.

This brings the country’s rate to 4.25%.

The bank cut the rate by one percentage point last month.

Reserve Bank Governor Lesetja Kganyago said that the country’s economy was under pressure and growth forecasts in negative territory.

“The bank expects GDP in 2020 to contract by 6.1% compared to -0.2% expected just a few weeks ago.”

He said that China appeared to be recovering and this was good news for economies, including South Africa.

However, for now, the rand was still under pressure.

“The rand has depreciated by 22.6% against the US dollar since January and by 17.3% since the March meeting of the MPC.”

Governor Kganyago said that inflation was under control for now but this could change and the bank has needed to act.

By Helena Wasserman for Business Insider SA

Large companies have been urged to pay their creditors early this month in an effort to bolster small and medium businesses.

The CEO Initiative, whose members include 200 company bosses, has called on businesses to settle their bills with suppliers on 20 April.

According to Discovery’s CEO, surveys among small businesses show that 60% of them are either considering retrenchments, or have already started.

Business for South Africa estimates that less than 50% of the economy is currently functioning.

The CEOs of Standard Bank, Discovery and other large companies have called on businesses to pay their suppliers earlier this month, as small firms face a struggle to survive during the national lockdown.

There are some 525,000 formal small and medium businesses (SMEs) in South Africa, which employ 6.6 million people.

“Given the lockdown, the vast majority are unable to pay their rent, utilities, and importantly, their employees. Initial surveys indicate that 60% of SMEs are either considering retrenching employees, or already have,” says Adrian Gore, CEO of Discovery.

Gore joined 200 other company bosses, as part of the CEO Initiative movement, in calling on companies to pay their creditors by Monday 20 April 2020.

“We believe early payment is the right thing to do and will have a significant impact on their ability to survive and keep paying their employees,” says Sim Tshabalala, CEO of Standard Bank.

“They are under enormous strain and we are already seeing many businesses having to close their doors, which has a significant impact on their ability to sustain their employees. Even outside of the lockdown, many of these businesses often do not have the cash flow needed in order to maintain sustainability.

It is estimated that less than 50% of the South African economy is currently functioning, according to Martin Kingston, spokesperson of Business for South Africa, a new organisation that coordinates the corporate response to Covid-19. He told a media briefing on Tuesday morning that the trade in liquid fuels is down 80% since the lockdown started

Kingston says companies in the accommodation, tourism and transport sectors are worst affected. He expects “a very significant contraction” in South Africa, with a large increase in unemployment.

Following a surprise 100 basis point interest rate cut on Tuesday, Reserve Bank governor, Lesetja Kganyago warned that South Africa’s economy will shrink by 6.1% in 2020. GDP is expected to grow by 2.2% in 2021 and by 2.7% in 2022.

KFC won’t pay rent during lockdown

By Loni Prinsloo, Leanne de Bassompierre and Janice Kew for Bloomberg

KFC-owner Yum! Brands Inc. has told landlords in South Africa that the U.S. firm won’t be paying rent while outlets are closed during a three-week government-enforced lockdown to contain the coronavirus pandemic.

The decision relates to 48 company-owned stores in the continent’s most industrialized country, a spokeswoman for KFC South Africa said in emailed comments. The remainder of the 1 145 KFC fried-chicken restaurants across Africa are operated by franchisees who are making their own arrangements, she said.

One owner of more than 40 KFC shops across four sub-Saharan Africa countries, Grant Wheatley, said he is in talks with landlords, banks and suppliers about arrangements to cope with the shutdown. South Africa has ordered all restaurants to close during the period, including delivery services, with reopening scheduled for 17 April.

Botswana and Lesotho, where Wheatley has outlets, have also imposed shutdowns.

Yum! and Wheatley join retailers around the world in asking landlords for leniency during a period where they will generate little or no revenue, creating a nightmare for banks and real-estate firms. The Foschini Group Ltd., a South African clothes retailer, said it’s stopping payments during the lockdown, while Swedish fashion chain Hennes & Mauritz AB and the U.K.’s Primark are among others to have withheld rent.

21-day lockdown: SA grinds to a halt

Note: This is a developing story. It will be updated as new information becomes available.

On Monday night, President Cyril Ramaphosa announced a nationwide 21-day lockdown to halt the progress of the coronavirus, and as such deployed the SANDF to help SAPS maintain order. The lockdown is effective as of 23:59:59 on Thursday, 26 March 2020.

Questions have been rife about who will shut down, who can go where and who will be able to do what.

Who will be affected by the lockdown?

The short answer is: almost everyone. No one, with the exception of the exempted listed below, will be allowed to leave their homes for the 21 days unless under strictly controlled circumstances, such as to buy food or medicine, seek medical care or collect a social grant.

The homeless will be housed in shelters which meet hygiene standards, or will be asked to self-isolate in quarantine sites which will be identified.

What can you NOT do during this time?

People will not be allowed to:

  • Gather for any event, including church services, parties or weddings
  • Visit family members in hospital – NetCare Hospitals have suspended visiting hours
  • Operate or visit restaurants, bars, coffee shops or takeaway places
  • Operate non-essential delivery services such as Uber Eats and Mr D Food
  • Visit malls for the purpose of recreational shopping (such as shopping for clothes or goods)
  • Visit casinos, fleamarkets, parks, cinemas, taverns, hotels, game reserves, lodges or guesthouses
  • Purchase or sell alcohol
  • Walk or jog outside

Who will stay open?

All businesses and shops will be closed for this period except for:

  • Pharmacies
  • Laboratories
  • Veterinary services
  • Banks
  • Essential financial and payment services, including the JSE
  • Supermarkets
  • Petrol stations
  • Healthcare providers
  • Spaza shops will remain open and be supported with bulk buying and in other ways, to keep their selves full
  • Essential municipal services, such as rubbish collection
  • Courier services moving essential goods

“Companies that are essential to the production and transportation of food, basic goods and medical supplies will remain open,” Ramaphosa said.

Among those who will be closed are:

  • Restaurants, cafes, bars and coffee shops
  • Non-essential public-facing businesses

Businesses who can remain open by working remotely should do so.

Who will be exempted?

People necessary for the response to the virus are exempted from the lockdown:

  • Health workers
  • Emergency personnel
  • Security services (police, traffic officers, military medical personnel and soldiers)
  • Those involved in the production, distribution and supply of food and basic goods
  • Essential banking services workers
  • Those working in maintenance of power, water and telecommunications services
  • Laboratory service workers
  • Workers providing medical and hygiene products
  • Workers providing essential municipal services, such as rubbish collection

South Africa’s burning questions on restricted movement

  • Are you able to walk to the shops?
    Only to shops within your immediate area.
  • Are you able to go jogging or cycling?
    No. You are to remain in your property.
  • Will you be able to visit friends or family?
    No. Movement is only for the vital functions of obtaining food, medicine, medical care or social grants.
  • In families where parents are divorced and custody is shared, will you be able to share your children?
  • Will you be able to visit parents or loved ones in old age homes or hospitals?
    No. Movement is only for the vital functions of obtaining food, medicine, medical care or social grants.
  • How will people be able to shop?
    People are encouraged to use the shops closest to their houses. Shops will be mandated to keep a distance of 1m between patrons. No more than 50 people will be allowed in the shop at any one time. It is advisable that only one person is in a vehicle at any one time. If you are transporting someone to get medical care, they are to sit at the back of the vehicle with the window open.
  • Will people be allowed to walk their pets?
    No. You are to walk them in your property.
  • Will movement be limited in complexes?
    Movement inside complexes will be dictated by the complex governing body, but the mandate is to stay at home unless absolutely necessary.
  • Are bottle shops classed as essential?
    No. These will be closed for 21 days. People may not sell or transport alcohol from one place to another.
  • Can your boss force you to take your annual leave during this period?
  • Will Home Affairs be open?
    Only on skeleton staff, to issue temporary IDs, replacement birth certificates and death certificates. No new applications will be considered.
  • If your driver’s licence expires during lockdown, will you be able to renew?
    No. All licences that expire in the next 21 days will be given a grace period for renewal. All driving tests scheduled during this period will happen once the lockdown is over.
  • How many people can attend a funeral?
    Should a person die during the next 21 days, only 50 people may attend the funeral. No night vigils may be held.

Freedom of movement

Harsher restrictions have been placed on travellers coming in and going out of the country:

  • South African citizens arriving in the country will have to undergo a 14-day quarantine period
  • International travellers arriving from high-risk counties will simply be turned back
  • Those who landed after 9 March from high-risk countries will be confined to their hotels for a 14-day quarantine period
  • No rail will operate in the public or private sector
  • Only essential air cargo will be allowed in
  • No cruise ships will be allowed at port
  • Essential cargo will be allowed at our eight seaports
  • Minibus taxis may transport essential services workers only, from 05:00 to 09:00, and from 16:00 to 20:00 daily
  • Bolt, Uber and other e-hailing services will be able to operate for essential services workers only, from 05:00 to 09:00, and from 16:00 to 20:00 daily
  • Buses will be able to operate for essential services workers only, from 05:00 to 09:00, and from 16:00 to 20:00 daily

Economic safety net

Ramaphosa reiterated the dire impact Covid-19 could have on the economy, which could cause businesses to close and many to lose their jobs.
A number of measures have been implemented:

  • The creation of a solidarity fund geared at support for those whose lives have been disrupted and to combat the virus. Contribute at www.solidarityfund.co.za
  • The creation of a Debt Relief Fund by the Department of Small Business Development
  • Old-age pensions and disability grants will be available for collection from 30 and 31 March 2020, while other categories of grants will be available for collection from 1 April 2020
  • Wage payments for employees through the Temporary Employee Relief Scheme will help companies pay employees during this period and avoid retrenchment
  • Employees who fall ill due to exposure in the workplace will be paid through the Compensation Fund
  • Government will provide tax subsidies of up to R500 a month for the next four months to private sector employees earning less than R6 500
  • Government has encouraged all employers to continue to pay staff where possible
  • Traditional shut-down periods over Christmas may be scrapped in 2020


By Fergal O’Brien for Bloomberg

The global economy is taking a hammering the likes of which has not been seen for years. With factories, stores and restaurants shut, aircraft grounded and travel restricted, the monthly Purchasing Managers Indexes from IHS Markit laid out the scale of the challenge. The US PMI, due later on Tuesday, is forecast to show sharp contractions.

The euro-area measure for manufacturing and services dropped to the lowest since the series began in 1998, as did the gauges for the UK and Australia. Japan’s composite index fell to the weakest since 2011, while measures for Germany and France also plunged.

“The near-term economic outlook is terrible,” said Stephen King, senior economic adviser at HSBC Holdings. “There should be no surprise about these numbers given what is going on and that they confirm what we knew from China earlier.”

The PMI may not even capture the full extent of the downturn, because of the way the hit to supply chains is distorting the results. IMF Managing Director Kristalina Georgieva warned on Monday that the global economy is facing a slump “at least as bad as during the global financial crisis or worse”.

In the UK, separate figures added to the bleak picture. The Confederation of British Industry said manufacturers’ orders books fell sharply, and companies anticipate a drop in output in the coming months.

Investor concern has sparked a panicked selloff in equity markets. The Stoxx Europe 600 Index has fallen more than 30% in the past month, effectively wiping out almost seven years of gains. The S&P 500 is at the lowest since 2016.

The airline industry is among the worst hit, and companies including Germany’s Deutsche Lufthansa have been forced to ground thousands of planes. Countless jobs are at risk because of closures, while manufacturing has also been disrupted by national lockdowns.

Warnings about the depth of the slump having been coming almost daily.

At the weekend, Morgan Stanley said that US gross domestic product could fall at an annual rate of 30% in the second quarter, driving up unemployment to average 12.8%. Federal Reserve policy maker James Bullard offered an even worse prediction that the jobless rate could rise to 30%.

Bloomberg Economics says the global economy will shrink almost 2% year-on-year in the first half, with the euro-area suffering the worst back to back quarterly contractions in its history. While a pickup is expected later this year, “a lot needs to go right” for that to happen, according to Tom Orlik, BE chief economist.

Just hours before the euro-area PMI, Goldman Sachs Group said the region’s economy could shrink more than 11% quarter-on-quarter in the three months through June.

Central banks are continuing their firefight, with almost 40 interest-rate cuts last week alone.

The Fed unexpectedly announced more huge measures on Monday, saying it will buy unlimited amounts of Treasury bonds and mortgage-backed securities to keep borrowing costs at rock-bottom levels. Both the Bank of England and the European Central Bank have also announced huge expansions of their asset-purchase programmes.

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