In today’s note, we combine two prominent measures of lockdowns and social distancing—the Oxford policy stringency index and the Google global mobility reports—into an Effective Lockdown Index (ELI) for every economy under our coverage. Globally, the ELI rose sharply in late March and has been stable since then. Readings are high almost everywhere, with only mainland China on a clear downward trend.
On a cross-country basis, the ELI correlates closely with measures of economic activity such as the flash PMIs for April. Building on that link, we use preliminary estimates from statistical agencies in four countries—Canada, China, France and South Korea—to construct an ELI-implied hit to the level of GDP for every economy under our coverage. This hit currently stands at 17% globally; relative to pre-virus trend growth of about 3%, this implies year-on-year GDP growth of -14% as of late April. The impact on growth for Q2 as a whole is likely to be smaller, assuming activity recovers somewhat in coming months.
A number of important caveats are in order. First, while combining two different indicators should reduce measurement error, the ELI is likely to be a noisy measure of lockdowns and social distancing. Second, our translation of the ELI into GDP assumes a linear relationship and is based on preliminary estimates from just four countries. Third, we ignore cross-country differences in the GDP weights of activities with large amounts of face-to-face interaction. Fourth, the relationship between the ELI and GDP may change over time as households and firms adapt their behavior and policymakers optimize for the least economically damaging restrictions.
The GS ELIs can be downloaded here.
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