Global Weakness Index by ECB Researchers Shows 2008-Style Hit

(Bloomberg) --

The coronavirus pandemic has dealt the global economy its most devastating blow since the financial crisis erupted more than a decade ago, according to European Central Bank researchers.

Their newly designed Global Weakness Index, which aims to track the health of the economy in real time, “has sharply increased” at a speed at least comparable to that of the 2008 crisis, Danilo Leiva-Leon, Gabriel Perez-Quiros and Eyno Rots wrote in a working paper published on Tuesday.

The GWI uses data from the largest advanced economies, including the U.S., the euro area, Japan and the U.K., as well as the biggest emerging markets.

Because the measure is based on soft indicators as of March 2, it may actually underestimate the beating the economy is taking. The index can be updated as soon as new regional data is released, the ECB researchers said.

A series of purchasing managers surveys released showed Europe is taking a battering not seen in decades because of government restrictions to contain the pandemic.

Central banks around the world are in firefighting mode. The ECB, U.S. Federal Reserve, Bank of England and Bank of Japan among others have launched massive programs to inject liquidity into the financial system.

©2020 Bloomberg L.P.