Miley Cyrus update

I hear some folks in the UK have come up with a rhyming slang name for the novel disease: the Miley Cyrus. Here are just a few quick points about its impact on the economy...

Canada's headline consumer price index fell 0.2 percent year-on-year in April, its first such decline since 2009. The outcome was entirely due to the collapse in global energy prices, which found its way down to the consumer level in April, as retail gasoline prices recorded a remarkable 39 percent year-on-year decline.  Excluding energy, the annual rise in CPI stood at 1.6 percent.  This is well below the Bank of Canada's 2 percent target, but the Bank will undoubtedly have taken note of a potentially ominous 3.4 percent rise in food prices.

It is unlikely that the inflation rate will be quite so low in May.  Global oil prices have been moving higher, despite significant short-term oversupply, and this has already started to show up at the pumps.

There are demands, in Canada and elsewhere, for governments to use their COVID-related handouts to push the economy in a greener direction -- a jump-start for the much-touted Green New Deal, if you will. Some movement in that direction may indeed occur.  To take just one example, even if a vaccine is found soon, air travel will be slow to return to its pre-pandemic level.  The aircraft being mothballed and retired by airlines all around the world are the older and more polluting models, so that's all to the good. 

Any positive impact from a fall in air travel is, however, likely to be swamped by events at ground level. Even as cities attempt to open up and workers are urged to return to their jobs, civic leaders are warning against returning to public transit at pre-pandemic levels.  A survey in Toronto just a few days ago revealed that about a third of that city's transit users plan to avoid the system until they are sure they will be safe.  There are high hopes for a pickup in cycling and walking, but the fact of the matter is that for a lot of commuters, the only alternative to transit is, alas,  to jump back in the car.

The shape of the eventual economic recovery from the pandemic has produced an alphabet soup of options -- will it be V-shaped, U-shaped, L-shaped, W-shaped?   This article from the CBC website provides a good summary.  I particularly like the idea from my long-ago home at TD Economics, that the shape of the recovery will vary by sector. Thus, grocery stores may have a V-shaped rebound,  while at the other end of the spectrum, arts and entertainment and sports face a prolonged L-shaped slog, with most other sectors in between, in a U-shaped world.

One thing everyone can agree on is that the worst case is the dreaded W, in which a second severe wave of the virus forces a further round of lockdowns and pushes the economy back to square one. Are the steps governments are taking to restart their economies cautious enough to avoid this?  We shall find out soon enough.