Welcome to issue #051 of the abroaden weekly insights newsletter where we explain why you shouldn’t worry about the EU recession.
The technical recession in the EU you shouldn’t worry about.
Late last week, a heart-stopping headline hit the presses.
“The Eurozone suffers double-dip recession as pandemic impact continues.”
“Enters.”
“Recession.”
“double-dip.”
All of these terms together can strike fear into the hearts of the readers.
There’s just one problem, though.
It’s not nearly as bad as it sounds. The European economy is growing right now (and was growing on Friday when economists announced it).
So what’s going on?
In short, a recession happens when an economy contracts for two separate quarters.
Economists measure broad economic growth by looking at “gross domestic product” or GDP.
GDP measures the value of all economic activity in a particular country or currency area.
With most of the eurozone in some lockdown for the past six months, it’s easy to think that the economy is in bad shape.
The problem, though, is that GDP is, in many ways, a lousy tool to see what’s happening right now.
For starters, GDP is a broad measurement, taking everything into account.
It doesn’t break down different sectors.
More importantly, economists didn’t build it for once-in-a-lifetime events like the current pandemic.
Because if they did, they would see that the indicators are much more positive than GDP tells us.
First, let’s look at how the European stock markets are doing. Here at abroaden, we’re big fans of indexes, especially when it comes to investing.
The Euro STOXX Total Market tracks 95% of all stocks traded in the eurozone.
Since the shock of March 2020, the index is up 74%.
Aside from a slight dip last October when much of the continent went back into lockdown, financial markets have gone up.
Second, manufacturing within the continent is accelerating at record paces.
The “purchasing managers’ index” or PMI surveys buyers of goods in services across the economy.
In turn, this data gives us an indicator as to how they see the economy.
Manufacturing PMI is continuing to rise across the bloc, coming to new records in Italy and Spain.
While PMI tends to overestimate actual production, these numbers undoubtedly paint a much better picture than GDP.
Overall, we’re better off than a lot of the news will tell us.
We’ve adapted surprisingly well to our current reality (even if we’re all beyond exhausted with the pandemic).
The best thing you can do when you see these sorts of headlines?
Please take a deep breath, put it all into perspective, and check our blog regularly for updates.
(For sure the first two. We’d love it if you did the last one as well 😀 ).
E-Commerce Jumps
Speaking of “better economic news than meets the eye,” the UN just released a study on e-commerce.
Probably to the surprise of no one, online sales had a great year last year.
By their measurement, e-commerce made up 19% of all retail purchases in 2020, up 16% from the year prior.
As the restrictions end in the West, it will be worth watching if e-commerce continues to gain ground or if physical commerce will continue to dominate retail.
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Our eBooklet on how to make awesome money decisions as the pandemic ends.
Last week, we gave a small, socially distanced talk on the economy to our friends in the office.
We thought it went well.
In fact, it went so well we decided to turn the presentation into an eBooklet.
Since you’re an (amazing) subscriber to our newsletter, we wanted to offer you a free advance copy of it. Get yours here!
Europe’s (second) Payment Push
Payments are one of those weird industries that’s almost always under “disruption.”
Almost every week, there’s a startup claiming to “change the way we make payments.”
When we see these sorts of press releases, we tend to ignore them.
However, news this week in the Financial Times (potential paywall) got our attention.
According to the report, a consortium of European banks will take on PayPal, Visa¸, Apple, and Google simultaneously.
You might have heard of these companies. There’s even a good chance you use at least one of them each day when you shop.
This push by the banks is somewhat puzzling. While card payments are expensive, many local alternatives either fail to pick up or don’t make it across borders.
Consumers and merchants mostly resist new payment trends unless it’s forced on them. (The pandemic is a great example where everyone adopted contactless payments overnight).
Additionally, Europe tried to take on the payment giants just ten years ago.
It failed miserably, although it did jumpstart one of the most innovative financial movements to date.
Will they have more luck this time? We’ll find out shortly.
Why speaking English no good is great for global business.
Despite strong protests from the French, English is and will continue to be the lingua franca for global business.
While there are plenty of practical reasons for this dominance, its learning ease makes it a perfect tongue to unite the world.
According to this podcast from NPR’s Rough Translation, there’s a bit of a problem: there are way more non-native speakers than native ones.
This in itself isn’t so bad. The issues come from the fact that most non-native speakers (over 2 billion!) have a difficult time understanding anglophones.
In this half-hour-long podcast, the host speaks to language expert Heather Hansen.
She argues that native speakers should adapt to non-native ones and not the other way around. Ms. Hansen believes we’ll become better communicators all around if we simplify our way of speaking.
As expats, we’re fascinated by these sorts of discussions because they kind of define our daily lives. Our guess is you would, too.
Give it a listen when you can, and let us know your thoughts.
Have a great rest of your week!
