Global tourism gradually starts picking up again after forced hibernatio

print

Global tourism gradually starts picking up again after forced hibernatio

Published Date: 2020-06-01 | Source: INCE|Community | Author: Chris Gilmour

Global tourism gradually starts picking up again after forced hibernatio

The old expression of "sell in May and go away certainly didn't hold true on the S&P 500 this year. Although the US equity market finished on a choppy note due to nervousness surrounding US/China relations in the wake of Chinese actions in Hong Kong, US markets ended up very strongly for the week and for the month. The S&P 500 closed 3% up at 3 044.31 on Fri 29 May. From its Feb 19 peak of 3 386.15, the index has now fallen 10.1%. It has risen by 36.1% from its Mar 23 low of 2 237.4. It is now trading above its 200-day moving average, which is a very bullish indicator. Markets are obviously now discounting a near-full recovery from the "induced coma" that the global economy was put into back in March with the advent of lockdowns around the world. These lockdowns have largely served their purpose, depending on the countries involved and also depending on political attitudes, and now restrictions on global economic activity are gradually being lifted. Short of a cure or a vaccine, there are certain sectors-notably hospitality, tourism and aviation-that will remain difficult to restore to anything like pre-Covid19 levels this year but the great majority of industrial manufacturing activity should be back to normal by the end of June this year. Costs will undoubtedly increase as firms will be required to ensure the safety of their workers in terms of social distancing and far greater hygiene.

The White House has taken the unusual step of deciding not to publish forecasts of US economic growth this year, given the huge uncertainty surrounding the impact of the coronavirus. This comes hard on the heels of the Chinese Communist Party's decision not to make any economic targets for 2020. The US economy shrank at a faster-than-expected pace of 5% in Q1 this year and most economists expects a truly horrific Q2 figure to be published. These forecasts are many and varied and the Congressional Budget Office predicts that Q2 GDP will shrink by 38% on a seasonally-adjusted basis, while the Atlanta Federal Reserves forecasts a 42% slump. And all of this comes at a time when another 2.1 million American filed for unemployment benefit, bringing the accumulated total of unemployed American to over 40 million. When the US Bureau of Labor Statistics releases its May jobs report on Jun 5, it is expected that the percentage of unemployed people will have risen to 19.5% from 14.7% in April. Incumbent US President Donald Trump is obviously fearful that the pace of economic recovery won't be fast enough to assure him victory in the Nov 3 presidential election. Coming off such a spectacularly low base in Q2, Q3's recovery will undoubtedly be very profound, but it is not guaranteed to be enough to convince voters that US economic policy is on the right track.

Meanwhile outside the US, a number of countries have resorted to extreme measures to entice foreign tourists back. Dispensing with quarantining measures for most tourists (apart from those emanating from so-called high-risk countries such as the US and UK) Cyprus has taken the unusual step of committing to pay for the full hospitalisation and accommodation costs of any tourists and their families who are unfortunate enough to become seriously ill from coronavirus while on holiday in that country. The island is able to do this because of its remarkable success in containing the virus, resulting in an extremely low transmission rate and a mortality figure of only 17 deaths. Sicily is also offering attractive packages to lure back both local and foreign tourists, though these packages are not as extensive as the ones being offered by Cyprus. It was reported that Japan was also considering incentives to lure international tourists but these have been denied by the Japanese authorities. Meanwhile on the aviation front, a number of airlines have committed to getting back up and running by Jun, notably Emirates, which has already started limited operations to a number of destination. Ryanair expects to have 40% of its flights in operation by July, while Qatar Airways expects to be flying to 80 destinations by Jun. It seems likely that an increasing number of countries whose GDPs revolve around tourism will rapidly begin opening up their countries to foreign visitors again. Spain, one of the worst-hit countries in terms of coronavirus fatalities, intends opening up its country to full-blown foreign tourism again from the beginning of July. With 80 million tourists per year, Spain is the world's second most popular global tourist destination after France. Almost a quarter of those 80 million tourists come from the UK and Spain is keen to establish a so-called "safe corridor" between itself and the UK so that returning British holidaymakers would not be required to self-isolate for 14 days. This safe corridor idea appears to be gaining traction in other countries as well, with New Zealand and Australia actively considering it. Against this improving international tourism background, one would have intuitively thought that South Africa might have been exploring ways to get international tourists back into the country but in reality that is not the case. South African tourism bodies believe that international airspace will only open up for South African travellers by February 2021. If correct, that will deal a body blow to international tourism to South Africa, from which it may be impossible to recover. South Africa moves to level 3 lockdown on Mon Jun 1, at which point most industrial activity will be back to a fair degree of "normality", alcohol will be permitted to be sold from Mon through Thu but cigarette sales will continue to be banned. Tourism and hospitality outlets remain closed while essential business flights will be permitted. The business as usual aspect is reflected in warnings from Eskom regarding strain on the electricity supply situation as an increasing number of industries return to full capacity. The JSE Alsi closed 0.7% up for the week at 50 483 on Fri 29 May. From its peak of 61 685 on 25 Jan 2018, the Alsi has now fallen by 18.2%. From its recent low point of 37 693 on Mar 19, the index has risen by 34%.

The Fragile Five + Russia
Country GDP Growth (%) Inflation (%) Unemployment (%) Interest Rates (%)
South Africa -0.5 4.1 29.1 8.90
Brazil -0.3 2.4 12.6 6.96
India 3.1 5.8 7.8 6.01
Indonesia 3.0 2.7 5.0 7.68
Turkey 4.5 10.94 13.6 12.24
Russia 1.6 3.1 5.8 5.57
Source: Trading Economics

JSE listed company results out this week;

  • 1 June 2020
    • Taste Holdings
    • 2 June 2020
      • Nictus, Prosus, Brait, Multichoice, Orion Minerals, Oceana
      • 5 June 2020
        • Eastplats

        Economic data releases this week;

        • 1 June 2020 2020
          • Absa Manufacturing PMI May, NAAMSA New Vehicle Sales May
        • 3 June 2020
          • Standard Bank PMI May
          • 4 June 2020
            • SA Current Account Q1
            • 5 June 2020
              • SACCI Business Confidence Indicator May, Forex Reserves May

            An image of Chris Gilmour