The progression of COVID-19 and the prospects for a vaccine remain the key drivers of economic activity globally.

The initial stages of economic recovery in the United States, Europe and the Asia-Pacific are proceeding slightly faster than we anticipated. However, localized lockdowns associated with a second wave of infections have the potential to slow the recovery in the second half of the year at the same time that pent-up demand fades.

China is ahead of most of the world in the timetable of its recovery, having been affected by the virus and containment efforts first. Chinese GDP grew by a greater-than-expected 11.5% in the second quarter compared with the first quarter, having contracted by −10% in the first quarter.

Global trade recorded one of the steepest drops ever recorded in the May-June period. Vanguard believes this represents an inflection point and the numbers have since bounced off lows, with our index of leading indicators increasing for a third consecutive month.