The rebound in economic activity in Q3 exceeded analysts' expectations, so in the coming months, the main central banks and international institutions will revise their forecasts of the global decline in GDP upwards, assesses the Polish Economic Institute (PIE).
PIE pointed to the so-called surprise indices, reaching all-time highs in June. According to PIE, analysts have not been able to correctly estimate the effects of the freezing of economies as a consequence of the COVID-19 outbreak. They gave an example of the Economic Surprise Index, compiled by Citigroup, which measures the discrepancy between actual economic data from the world's 10 largest economies and the median of commercial analyst forecasts.
"The index rises when the economic results are better than forecasts, and falls at the time of negative surprises," they explained.
PIE experts noted that before the pandemic, the index rarely exceeded 100 points or fell below minus100 points. In April, it fell to the lowest level in history (approx. -145 points). Then in June it sharply increased to a record level (270 points). In the following months, global macroeconomic data continued to surprise positively – at the beginning of September, the index was still hovering around 190 points.
"Surprises from Q3 will be reflected in the forecasts of international institutions, and these will be revised upwards. Central bank representatives point to greater optimism regarding activity in the second half of the year; it is also the effect of the decline in fears of a re-freezing of economies,". the PIE believes.
This change can be seen in the readings of another index - the World Uncertainty Index, to which PIE analysts refer. The barometer is created by counting words for uncertainty in reports from the Economist research group. The index peaked historically during the peak of the pandemic (April-May) and is now back to levels from the 2019 US-China trade war.