Global Flash PMIs Show How This Is an Economic Depression Level Event Risk

COVID19 is an economic depression trigger
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COVID19 is an Economic Depression Trigger

What is an economic depression? Well, it really is in the eye of the beholder, as there is not one universally accepted definition of economic depression. However, there are some things most econs and people generally agree upon.

  • It is an economic depression if output declines are especially deep
  • It is an economic depression if it results in stunningly high unemployment
  • It is an economic depression if the entire downturn in question, peak to trough, lasts longer than one or two quarters

One could say that throughout history, depressions have really been just a part of the price we pay to choose to live in a capitalist economic system. Business cycles go up, business cycles come down. And sometimes, they come crashing down hard.

But it is important to keep in mind that not all depressions are created equal.

Since WWII the United States has seen only one downturn that is often thought of as a relatively precise example of what is an economic depression. This was the Great Recession and Great Financial Crisis of 2007-09.

That particular downturn was: unusually deep, resulted in stubbornly high unemployment, and dragged on for years with a slow and uneven recovery.

In many ways, the Great Recession was more analogous to the Great Depression, if only there was a subset of that type of depression called ‘Great Depression Lite.’

It was addressed intensely by governments around the world, and not a moment too soon. Otherwise, it very well could have been far worse.

Does This Mean that This is an Economic Depression?

Short answer, no.

But the more complete answer hearkens back to the Great Financial Crisis, and the sufficiently strong, rapid and recurring response.

The longer answer is that this very well could mean that this is an economic depression level event if governments do not go all out to

  • Keep citizens inside and separated from each other until there is something close to a cure (at least a highly effective course of treatment). This could take many, many, many months, and these governments need to be ready and willing to enforce this.
  • Encourage working from home (telecommute, virtual meetings, virtual reality, etc), rather than so much in-person. The possibilities of this are great, and could definitely help recover some of the lost GDP.
  • Backstop the people with 1. Massive financial aid in the form of strait up cash transfers that never have to be repaid 2. Massively extended unemployment insurance 3. Huge amounts of low-interest, long-term loans and 4. Healthcare! Healthcare! Healthcare! This includes testing! testing! testing! and something basically akin to universal healthcare even in countries that currently do not have it, until the crisis is over.
  • Backstop companies with huge amounts of low-interest, long-term loans
  • Backstop financial markets with what will probably be looked at in history as “Unlimited Quantitative Easing” or UQE.

Yeah, all that is one very tall order. There is so much in there it is sure to blow the minds of fiscal hawks everywhere. But, the alternative is so much worse, and most of them know it.

Failing to GO BIG now, with this serious of a global health and financial rolling shock would open the door wide open to both a very deep and very long depression, rather than what could end up being a deep but short one, by historical standards.

How do Global PMIs Show This is an Economic Depression Level Event?

There are two things to look at when examining the following snapshots of these various global IHS Markit Flash Purchasing Managers Indexes that are telltale sings of something seriously amiss

First, upon looking at the trends and dates, it is clear that the major economic powerhouses of the world were suffering the Trump Slump during 2018 and 2019, with only modest, at best, recovery in late 2019 and/or early 2020.

Despite a brief upturn in global Leading Economic Indexes and global Coincident Economic Indexes, there simply wasn’t enough of both time and oomph to have a snowball’s chance in hell fending off what came next: A once-in-a-century acute pandemic.

More troubling, it is fair to say that some governments failed to act sufficiently and also in time to fend off out-of-control epidemic (Italy, looking at you), and at least one even both a failed to act sufficiently and also in time to fend off out-of-control pandemic AND also mislead and continue to mislead its citizens as to the real nature of the problem (United States, looking at you).

There was probably a small window in these two examle countries to prevent this health crisis from going full-epidemic, and thus also preventing what is now an economic depression trigger event, but that window closed.

Now on the economic front it is all about mitigation and attenuation: Trying to keep the depression from being both deep and long, while doing the least harm possible.

So, history may look back on this as an acute and brief recession and not list it as a depression, but bold, aggressive, even out-of-the-box action must be taken now, and acted upon on not just local levels, but globally as well. And again, it’s not just about the economics. A huge part of the prescription for economic recovery includes finding an effective treatment A.S.A.P.

The following graphics are courtesy IHSMarkit. To receive the full and underlying PMI data, contact

Flash PMI data are released monthly and in advance of comparable official economic data.

China 2020 PMI is an economic depression indicator
Eurozone March 2020 Flash PMI is an economic depression indicator
US March 2020 Flash PMI is an economic depression warning

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