Giada Giani

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Igor Cesarec

In our analysis, we look at pollution data as a proxy for manufacturing output across Europe. We use city-level weekly data on pollution levels from the European Environment Agency from January 2016 to June 2020 for the analysis. The level of nitrogen dioxide (NO2) is selected out of three available pollutants due to good coverage and close correlation with manufacturing activity. What we find is that the recovery is underway but there are differences in the pace of recovery between countries. While all countries look to be recovering, few are back to the pre-pandemic levels. Some appear to be close to rebounding to the pre-pandemic levels, but caveats to the rebound are in place (Netherlands, Spain). For others, the recovery is well underway but likely still not complete (France, Germany), while in many countries the recovery is likely lagging behind (Italy, U.K., Sweden, Poland). Authors: Igor Cesarec,

In our analysis, we look at pollution data as a proxy for manufacturing output across Europe. We use city-level weekly data on pollution levels from the European Environment Agency from January 2016 to June 2020 for the analysis. The level of nitrogen dioxide (NO2) is selected out of three available pollutants due to good coverage and close correlation with manufacturing activity. What we find is that the recovery is underway but there are differences in the pace of recovery between countries.
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While all countries look to be recovering, few are back to the pre-pandemic levels. Some appear to be close to rebounding to the pre-pandemic levels, but caveats to the rebound are in place (Netherlands, Spain). For others, the recovery is well underway but likely still not complete (France, Germany), while in many countries the recovery is likely lagging behind (Italy, U.K., Sweden, Poland).
 Authors: Igor Cesarec,

What Does Pollution Data Say About the European Manufacturing Recovery?

July 29, 2020 - Industrial production and manufacturing output have collapsed during the COVID-19 pandemic across Europe as a result of state-imposed lockdowns. As countries start to emerge from these lockdowns, the ability to gauge where they are in the recovery is important. Because economic data typically has a 2-3 month lag, the search is on for anecdotal evidence that can give quicker results.

Nowcasting Economic Activity

Craig Woolford

Once restrictions are eased, we expect a bounceback in spending as people venture back outside and try to shift back to normal. But the speed of any recover is still a big unknown as questions linger about safety which could potentially dampen demand. Will people get comfortable again being among large groups of people, or sitting on a crowded airplane? Until they are, the thought of traveling abroad to a busy tourist destination may not be appealing. In addition to consumer fears, border restrictions in certain countries around the world could also limit the resumption of international travel. In the attached report, we look at Australia, where border restrictions mean international travel is suspended for the foreseeable future. This is a concern as Australians like to travel — they made 11 million offshore trips last year. The silver lining is that a portion of the money Australians would have spent overseas — some A$50 billion — could remain in Australia and benefit the domestic economy. Overall, we expect domestic tourism in Australia to rise 7% and retail growth to be boosted by 1 percentage point as a result of this shift in spending.Authors: Craig Woolford,

Once restrictions are eased, we expect a bounceback in spending as people venture back outside and try to shift back to normal. But the speed of any recover is still a big unknown as questions linger about safety which could potentially dampen demand. Will people get comfortable again being among large groups of people, or sitting on a crowded airplane? Until they are, the thought of traveling abroad to a busy tourist destination may not be appealing. In addition to consumer fears, border restrictions in certain countries around the world could also limit the resumption of international travel. In the attached report, we look at Australia, where border restrictions mean international travel is suspended for the foreseeable future. This is a concern as Australians like to travel &mdash;&nbsp; they made 11 million offshore trips last year. The silver lining is that a portion of the money Australians would have spent overseas &mdash; some A$50 billion &mdash; could remain in Australia and benefit the domestic economy. Overall, we expect domestic tourism in Australia to rise 7% and retail growth to be boosted by 1 percentage point as a result of this shift in spending.Authors: Craig Woolford,

A Source of Increased Domestic Spending

May 19, 2020 - The economic fallout from the COVID-19  virus is expected to be huge. Millions of people are out of work and economic activity is at a standstill while we wait for the virus curve to flatten. Although many industries are affected, one of the hardest hit sectors has been tourism, with the lockdown grounding both business and leisure travel. Restaurants are also struggling as social-distancing restrictions mean they can't open up to sit-down diners, forcing consumers to shift their spending towards at home options.

Locking Down Australian Tourists

Mark A Manduca

With the current global lockdown, business travel has for all extents and purposes been grounded. Businesses that were able to shift to remote working also shifted their in-person meetings and conferences to phone calls, video calls, and virtual meetings. Over the next few months, countries around the world will start to ease restrictions and get their economies back open for business, but to what extent will things change on the corporate travel front?. Will corporate travel return to the pre-COVID-19 levels? We think corporate travel will likely come under pressure both in the long and short term. First, varying border and quarantining rules in place globally will make travel itself difficult and possibly create significant litigation risks for corporates. Second, the accelerating use of digital meetings throughout the crisis could create a secular shift which replaces costly and time-consuming corporate travel. In the short term, a 1% impact on corporate travel volumes has a 10% impact on airlines profits, keeping other variables static including lower fuel costs and the industries high level of fixed costs. In the attached note, we also look at the volume of business vs. leisure travelers and domestic vs. international travel for major cities. In the longer term, the secular shift could hit the portion of the industry that travels more than five times a year as well as the corporate traveler that visits other offices versus visiting clients. A decline in the first could come from the increased difficulty of travel while a decline in the second could come from corporates seeing a cost saving as virtual meetings and video conference calls have been effective substitutes for in-person meetings. If the number of trips is cut in half for both the high-volume traveler and the "own office" traveler, corporate travel overall could be secularly impaired by 25% from 2019 levels.Authors: Mark A Manduca,

With the current global lockdown, business travel has for all extents and purposes been grounded. Businesses that were able to shift to remote working also shifted their&nbsp; in-person meetings and conferences to phone calls, video calls, and virtual meetings. Over the next few months, countries around the world will start to ease restrictions and get their economies back open for business, but to what extent will things change on the corporate travel front?. Will corporate travel return to the pre-COVID-19 levels? We think corporate travel will likely come under pressure both in the long and short term. First, varying border and quarantining rules in place globally will make travel itself difficult and possibly create significant litigation risks for corporates. Second, the accelerating use of digital meetings throughout the crisis&nbsp; could create a secular shift which replaces costly and time-consuming corporate travel. In the short term, a 1% impact on corporate travel volumes has a 10% impact on airlines profits, keeping other variables static including lower fuel costs and the industries high level of fixed costs. In the attached note, we also look at the volume of business vs. leisure travelers and domestic vs.&nbsp; international&nbsp; travel for major cities. In the longer term, the secular shift could hit the portion of the industry that travels more than five times a year as well as the corporate traveler that visits other offices versus visiting clients. A decline in the first could come from the increased difficulty of travel while a decline in the second could come from corporates seeing a cost saving as virtual meetings and video conference calls have been effective substitutes for in-person meetings. If the number of trips is cut in half for both the high-volume traveler and the "own office" traveler, corporate travel overall could be secularly impaired by 25% from 2019 levels.Authors: Mark A Manduca,

A 1% Impact on Corporate Volumes Impacts Airline Profits by 10%

May 18, 2020 - Corporate travel has been a cornerstone of business for decades. Whether it's a traveling salesman, sitting in the middle seat of a regional flight between small cities in his sales coverage or the global businessman who travels around the world meeting meet clients and colleagues, business travel for many involves being on an airplane. For airlines, although almost 85% of their passengers fly to visit family and go on vacation, the smaller corporate category generates 40% of airline revenues. 

Corporate Travel

In Europe, as the number of coronavirus cases fell through June there was hope that summer holidays were back on the agenda. But July brought a resurgence of cases in areas of Spain and parts of France and Germany. This uptick in COVID-19 activity is much more localized than the ‘second wave’ outbreak occurring in the U.S. However with fears over conditions deteriorating rapidly, there is a rising risk of restrictive new policy measures being introduced. And as travel across the continent increases, the chances of new outbreaks emerging in other countries increases. The impact of international travel limitations, either due to imposed restrictions, fear, or more limited transport availability, is uneven across European countries as tourism accounts for very different shares of GDP. In addition, whether tourism expenditures in a country are primarily inbound or domestic has a big effect. Strongly tourist-oriented like Greece, Croatia, and Portugal rely on inbound spending for a significant amount of their tourism spending. These countries may not be able to make up the loss of non-resident spending. Countries like Italy and Spain have an above-average share of tourism in their GDP, but resident tourists account for an important part of overall tourism expenditure. Some economies could see an uptick in tourist spending as residents opt to stay local.Authors: Giada Giani,

In Europe, as the number of coronavirus cases fell through June there was hope that summer holidays were back on the agenda. But July brought a resurgence of cases in areas of Spain and parts of France and Germany. This uptick in COVID-19 activity is much more localized than the &lsquo;second wave&rsquo; outbreak occurring in the U.S.&nbsp; However with fears&nbsp; over conditions deteriorating rapidly, there is a rising risk of restrictive new policy measures being introduced. And as travel across the continent increases, the chances of new outbreaks emerging in other countries increases. The impact of international travel limitations, either due to imposed restrictions, fear, or more limited transport availability, is uneven across European countries as tourism accounts for very different shares of GDP. In addition, whether tourism expenditures in a country are primarily inbound or domestic has a big effect. Strongly tourist-oriented like Greece, Croatia, and Portugal rely on inbound spending for a significant amount of their tourism spending. These countries may not be able to make up the loss of non-resident spending. Countries like Italy and Spain have an above-average share of tourism in their GDP, but resident tourists account for an important part of overall tourism expenditure. Some economies could see an uptick in tourist spending as residents opt to stay local.Authors: Giada Giani,

A COVID-19 Second Wave in Europe?

August 10, 2020 -By all accounts, 2020 has not been a normal year. As COVID-19 lockdowns swept the globe, activities like working from home, remote learning, and social distancing became the ‘new normal’.  So it’s not a surprise the summer holiday season was also thrown up in the air. International travel restrictions meant holidays abroad were put on hold and replaced by ‘stay-cations’.  Caution by travelers meant more trips by car instead of by plane or rail.