As discussed in the latest Capital Note over on Capital Matters, Sweden came out with (under the circumstances), bearable economic numbers today. Quarter-on-quarter GDP fell by 8.6 percent (and 8.2 percent year-on-year). While these numbers were in no sense good (Statistics Sweden notes that “the decrease in GDP is the largest single quarter drop in the directly comparable time series starting 1980.”) they compare favorably with some of the data elsewhere in Europe and, for that matter, the U.S.

Writing in The Spectator, Matthew Lynne:

It was also better than most other places. Overall, the euro-zone reported a 12 per cent drop in output over the same period. Spain was down by a terrifying 18.5 per cent, France by 13 per cent, and Germany by ten per cent. The United States was down by 9.5 per cent…

As reported in an earlier Capital Note, Swedish companies also reported a better second quarter than might have been expected, and it is, I think worth noting this from a Financial Times article on this topic:

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What is the likelihood that this fear factor subsides?” asked Mr Danielson [the chief equity strategist for Swedish bank, SEB]. “That is going to be the big question of how quick the recovery will be. Now it’s about psychology, it’s about people.”

He is not alone in thinking that Sweden has a subtle psychological advantage by dint of having stayed more open and having people less scared of working, shopping and socialising outside the home.

By contrast, there is clear evidence in Manhattan — and not just Manhattan — that the prolonged lockdown (as well, of course, as continuing fear of contracting COVID-19) is, in a sense, feeding upon itself.

Bloomberg:

It’s been almost two months since Manhattan started to reopen, but the shoppers aren’t around.

Wealthy New Yorkers have decamped for the summer, or longer. Storefronts are boarded up in Soho, while the Times Square and Fifth Avenue sidewalks are quiet as a city devoid of office workers and tourists tries to regain its footing.

New York was already dealing with a glut of retail space — and the pandemic is making it worse. Average asking rents in Manhattan, which have been sliding for years, plunged to the lowest level since 2011 in the second quarter, according to a report by CBRE Group Inc. Vacancies are growing in prime shopping districts, the firm said . . .

It’s easy to understand why Manhattan is hurting. Midtown’s office workers are at home, and many are expected to stay there for months. The same is true of international tourists, with a 40% decline seen this year, according to the Partnership for New York City.

In addition to national chains, the group estimated that as many as one third of the city’s 230,000 small businesses will close for good as restaurants and bars struggle to pay rent with social distancing sapping business.

“The restaurant scene supports so many pieces of New York City culturally, it’s very difficult to watch,” said Camille Renshaw, Chief Executive Officer of brokerage B+E. “So many people make money as they come up in the city through the restaurant scene. If that doesn’t exist, how do these folks survive?”

Our David Bahnsen asks just that question on Good Day New York Fox 5.

Back in Sweden, the finance minister is unwilling to make much of a connection between the country’s light touch approach to lockdown, possibly, I suspect, out of politeness, but, as noted by Bloomberg, she also makes two important points worth remembering as we wait for future data. The first concerns Sweden’s exposure to the global economy (exports account for more than 40 percent of GDP) and the second compares its performance relative to Denmark, a country with which it is inevitably compared:

The finance minister also cited her country’s sensitivity to the broader economic cycle in shaping how the recovery evolves from here. “We’re an export-dependent country so we are of course very affected by what happens in other parts of the world,” Andersson said.

Sweden’s industry structure is an important factor in assessing how the country measures up against its Nordic neighbors, according to Andersson. Denmark, for example, is expected to see a similar economic contraction despite a strict initial lockdown and substantially fewer fatalities.

“Look at Denmark, a big exporter of pharmaceuticals and food,” Andersson said. “Of course they are less exposed to a big drop in the world economy than we are.”

Those sectors are, of course more stable than engineering, which represents a large part of the Swedish economy.

Meanwhile, from Newsweek:

While novel coronavirus cases have spiked across several parts of Europe, including Spain, France, Germany, Belgium and the Netherlands, Sweden—where a countrywide lockdown was never issued—continues to report a downward trend in new cases and new deaths…

Sweden’s latest case-fatality ratio (portion of deaths compared to total cases) was reported to be 7.1 percent. The figure is more than half the percentage reported in the U.K. (15.1 percent), half that of Italy and Belgium (each reporting 14.2 percent) and nearly half that of France (13.4 percent), according to Johns Hopkins University.

We will not know, of course, know how Sweden truly compares with other countries until we see how any second wave plays out elsewhere and, of course, in Sweden itself, but The Spectator’s Matthew Lynne is right to make this point:

True, infections [in Sweden] were high to start with, and so was the mortality rate from Covid-19, at least compared to its immediate neighbours. Right now, however, it doesn’t look as if the final tally will be much different to anywhere else. But the economy will emerge in far better condition, with less lost output, and less extra debt as well.

There is a lesson in that for other countries. Of course it is important to protect health systems and make sure they are not overwhelmed. But it is also important to protect the economy. If you don’t, very quickly there aren’t any jobs to go back to, and there won’t be any money to pay for healthcare or for anything else for that matter. Sweden has done a better job of protecting output than any other major, developed country. And if a second wave does arrive in the autumn or winter, the rest of the world should take note — and not rush straight back into lockdown no matter what the pressure to do so might be.

There is a lesson in all this for New York City too and, as David Bahnsen has stressed, for its business leaders as well. Whether anyone is paying attention is a different question.