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July 8, 2020
  • Clean energy is on track to outpace oil and gas investments as the economic recovery pivots to a greener model.
  • Gold continues to act as a safe haven for investors, with 18.2% growth this year, including a 2.9% increase in June alone. 
  • Consumption data, such as restaurant reservations and toll road traffic, is proving to be a more reliable indicator of the scope and pace of recovery.

The coronavirus pandemic created a reset moment for the global economy. Now, clean energy technology is emerging as both the catalyst and spirit of that post-pandemic recovery, with green infrastructure investment globally north of $1 trillion. And, thanks to ongoing pressure from investors and shareholders, spending on renewable power will hit 25% of energy industry spending by 2021 — surpassing oil and gas for the first time. 

Growth is not solely driven by concern for the climate. Costs associated with clean energy are now lower than oil and gas — solar in particular has experienced a significant growth and consequential price drop — to the point where oil companies are devoting up to 15% of their budgets to renewable energy, spending 40% less on oil and gas since 2014. The industries that may transition to renewables over the next ten years include everything from wastewater treatment to manufacturing with reusable carbon —  and all will need supply chains that can keep up.

Sustained incentives from governments are the scaffolding for this optimistic long-term outlook. As with most policy implementation, not all countries are moving at the same speed. Even within the EU, which issued its Green Deal directive to member countries to reduce carbon emissions to zero by 2050, proposed plans and their implementation varies widely. China, home to the largest solar panel producer, is also adopting more aggressive targets for carbon emissions as the environmental damage from industrialization becomes harder to ignore.

The steady growth of clean energy’s share of total energy supply investments will soon eclipse oil and gas, even as the total amount spent fluctuates. The growing investments in renewables by oil companies themselves will likely keep shrinking the share of fossil fuels.

China and Japan’s divergent recoveries
Japan’s quarterly Tankan survey was grim, even by pandemic standards. The impact on the Japanese auto industry led to a drop from -8 in the first quarter to -34 in the second in the manufacturing index; with a -8 to -17 drop, the country’s services industry did not fare much better. This bad news is a sharp contrast to China, whose shares are strong enough to make it the second-best performer in major markets so far this year.

The U.S. risks a double-dip recession

Anxiety about a double-dip recession in the U.S. is softening the dollar as coronavirus cases continue to surge. Currency is not the only unsettling indicator: restaurant reservations through the platform OpenTable, which plummeted by nearly 100% in March, have plateaued after a 20% increase in May. A lockdown akin to March’s near-total shutdown is extremely risky, but a path to a safe reopening for the hardest-hit states in the U.S. is not yet clear.

  • The increase in the Eurozone’s PMI from 31.9 in May to 48.5 in June (after a 13.6 low in April) is a positive signal, but must be taken with a grain of salt because of the indicator’s failure to capture the full extent of the economic downturn when the pandemic began. 
  • Real-time or near-real-time consumption data from countries at various phases of reopening, as opposed to monthly backward-looking data, is currently the more reliable barometer for the economy.

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