This coronavirus crisis has been brutal – but the green shoots of economic recovery are showing

We should not underrate people’s intelligence. We can all see if things are picking up, then we will help it along by spending a bit of money, writes Hamish McRae

The first place to look is China. That is where it began and it is a case of first in, first out (Reuters)

We can perhaps start to look forward. Wherever you look the factories are restarting their production lines. The airlines are reopening domestic routes. Bars and restaurants are trying to see how many customers will come back. Traffic is building up again.

Look around the world and there is common pattern at this stage of the coronavirus pandemic. Some countries are ahead of others, but you would expect that. But the differences are less important than the similarities.

There are glitches. Elon Musk clashed with the Californian authorities about restarting the Tesla factory in Fresno. Meanwhile, the UK is trying to introduce a 14-day quarantine on travellers seems nuts, when cases are falling so fast that the Oxford group is struggling to find enough cases on which test its vaccine.

Let’s remember too that people sadly are still dying, and in some countries the outbreaks are getting worse, not better. Brazil is particularly worrying. And of course there is always the concern that the next wave of the virus will attack before an effective vaccine is available.

But to focus on the detail of the mess, and it is a mega-mess, is to miss the big picture. April was the trough. The world is now clambering out. So how quickly can we haul ourselves up?

The first place to look is China. That is where it began and it is a case of first in, first out. The news is mixed. The economy contracted by nearly 7 per cent in the first quarter but output is now climbing. If you don’t trust the official output figures look at real data. Electricity supply managed a small year-on-year increase in April, whereas it had been running well down. Oil demand is almost back to pre-crisis levels. The authorities will try and boost general investment to push things up through the summer.

The trouble is that consumers still seem scared, and who can blame them? There was a big bounce in spending at the beginning of this month during the holiday week, but from a low level. Export demand will be weak for political as well as economic reasons, so the key to China’s recovery will be its massive middle class. Consumption coupons worth nearly $3bn are being handed out in 170 cities, but that is a short-term fix. There has to be sustained spending and for that confidence has to come back.

The next thing to look for will be what the American middle class does. The US is towards the back of the global economic cycle, but the sheer might of American consumption is such that it can just about pull the entire world up. Last month, according to surveys, consumers were more confident than economists expected. But that may have been a reaction to the “economic impact payment” lobbed into their bank accounts by the federal government, with a letter from Donald Trump to “my fellow American” telling them how much – for a typical family of two adults and two children it was $3,400.

There may be another payment in the pipeline, but of course this cannot go on forever. So will this is enough to underpin a lasting, self-sustaining consumer recovery. Will Americans spend? It is the most important question in the entire world economy and we just don’t know the answer.

Of the rest, well from a British or European perspective, there are places to look for clues.

One will be how people behave as the lockdowns progressively ease. Early indications will come in countries that are already opening. People across Europe are going out in the streets, but are they spending much money in the bars? I fear they will quite cautious.

Tourism matters. Southern European nations are trying to pump up the holiday season but realistically it will be pretty dreadful. It would be nice to think that domestic tourism will replace foreign holidays and to some extent that may happen. But the unpleasant taste from the signs in the traditional UK holiday destinations that visitors are not welcome will linger. If you’re not welcome in late May will you be embraced with open arms in July?

There will be other clues. Young people may have been hardest hit financially, but they are also the most robust temperamentally. If the young get spending, that will be seed-corn for the hospitality industry – which in turn will create more jobs in the pubs and bars.

Finally, we should not underrate people’s intelligence. We can all see if things are picking up, and if they are, we will help it along by spending a bit of money. For example, Memorial Day in the US may see an increase in spending thanks to traditional sales.

At the depth of the depression in 1933 the new US President, Franklin D Roosevelt, said in his inaugural address that “the only thing we have to fear is... fear itself”. The world is not in nearly as bad a mess as it was in 1933, but we do need to be a little less frightened to get thing moving again.