Great Depression-Sized Slowdown Seen, but Some Light Appears
NEW YORK (AP) – The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Tuesday related to the global economy, the work place and the spread of the virus.
GLOBAL MALAISE: Economists are still trying to put into context the shock that the world has absorbed, and will absorb. On Tuesday, the International Monetary Fund put the damage at Great Depression levels.
— France is forecasting an 8% drop in growth this year and is staring down its worst recession since World War II. And that 8% drop may be optimistic, Finance Minister Bruno Le Maire said Tuesday.
The nation is pumping money into unemployment benefits and helping struggling businesses. But that spending, coupled with plunging growth, could push France’s deficit up to 9% in 2020, Budget Minister Gerard Darmanin said.
AS YOU WERE: North America is in lockdown but in regions struck early by the coronavirus, there is movement toward whatever will become the post-pandemic normal. Those attempts could provide the road map ahead for the rest of the world.
— Italian book, stationary and children’s stores were allowed to open nationwide Tuesday, provided they could maintain the same social-distancing and sanitary measures required in supermarkets. Some regional governors did not greenlight those openings, however, and many shop owners are keeping their doors shut.
— Poland will start to gradually lift restrictions Sunday on businesses and individuals. Government spokesman Piotr Mueller said that the number of people allowed into shops is expected to be raised and some restrictions on open air activity will be lifted.
— Audi has restarted operations at its Hungarian plant, though at a very limited scale. A single shift of about 100 employees began assembling V6 engines Tuesday, with another V6 engine assembly line expected to restart by the end of the week. Wider plant activities, albeit still in single shifts, are expected to gradually restart late next week.
— Austria is allowing small retailers, DIY businesses and gardening supply stores to reopen Tuesday. Customers will be required to wear masks and maintain social distancing. There will be limits on the number of people allowed into stores.
COST IN JOBS: The wave of layoffs and furloughs have been massive. Companies continue to shed jobs, though most vow to bring people back into the workplace as soon as it is safe.
— Groupon will release or furlough about 2,800 workers, more than 40% of its entire workforce. The company said in a regulatory filing that the majority of the cuts will take place in the current quarter.
— New Zealand, which has also been hit by the outbreak, is now absorbing the economic fallout. NZME, which runs radio stations and newspapers, is reducing its workforce by 15% through layoffs and attrition.
THIN AIR: It’s a mixed day for airlines. From an operations standpoint, the situation continues to deteriorate. But an agreement on a potential rescue package appears to be getting closer.
— The International Air Transport Association estimated Tuesday that airline passenger revenue this year will drop by $314 billion, a 55% plunge from 2019. Two weeks ago, the IATA forecast a $252 billion drop.
— Airline stocks rose sharply on expectations that the airlines will tap $25 billion in grants and loans to cover their payrolls. The nation’s leading airlines could begin agreeing to Treasury’s terms as early as Tuesday, according to officials briefed on the matter.
— Southwest Airlines CEO is warning employees the industry could be in for a long recovery. “I don’t think air travel will snap right back to where it was here this year, maybe it will come back next year,” Gary Kelly said in a video. “If this is a real recession and a bad recession, it could take four or five years.”
EARNINGS SEASON!: Twenty-three S&P 500 constituents are scheduled to report quarterly earnings this week. Of the 11 S&P sectors, only three are expected to report per-share profit gains compared with last year, according to S&P Global Market Intelligence. Everyone will be looking closely at companies with operations in China to see how they emerged from the outbreak there.
MARKETS: Volatility in markets continues. Markets have tumbled sharply since the beginning of the pandemic, but they’re up this week.
— Stocks moved broadly higher on Wall Street Tuesday as the White House and a number of state governors weigh how to gradually reopen the economy.
ISLANDS IN THE STREAM: Global activity has screeched to a halt, but there are aspects that are humming, and that includes streamed entertainment.
— Roku expects first-quarter steaming hours will spike 49% compared with last year, or total 13.2 billion hours. It anticipates an increase of 3 million active users, close to 40 million.
The newly launched Disney streaming service now has 50 million new subscribers.