In Europe, Hopes for an Economic Recovery Are Fading: Live Updates
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What hopes remained that Europe was recovering from the economic catastrophe delivered by the pandemic have all but disappeared as the lethal virus has resumed spreading rapidly.
France, Europe’s second-largest economy, this week amplified the concern as the government downgraded its forecast pace of expansion for the last three months of the year from an already minimal 1 percent to zero. Overall, the statistics agency predicts the economy will contract by 9 percent this year.
The diminished expectations are a direct outgrowth of alarm over the revival of the virus. France reported nearly 19,000 new cases on Wednesday — a one-day record, and nearly double the number seen the day before. The surge prompted President Emmanuel Macron to announce new restrictions, including a two-month shutdown of cafes and bars in Paris and surrounding areas.
In Spain, the central bank governor this week warned that the accelerating spread of the virus could force the government to impose restrictions that would produce an economic contraction of as much as 12.6 percent this year.
The European Central Bank’s chief economist on Tuesday cautioned that the 19 countries that share the euro currency may not recover from the disaster until 2022, with those that are dependent on tourism especially vulnerable.
Summer increasingly feels like a distant memory.
In August, with infection rates down, lockdowns lifted, and many Europeans indulging in the sacred ritual of the summer holiday, signs of revival were abundant. Many European economies expanded dramatically as people returned to shops, restaurants and vacation destinations.
Hopes had also been buoyed by a landmark agreement forged by the European Union to raise a $750 billion ($883 billion) euro relief fund through the sale of bonds backed collectively by all members. That move transcended years of resistance from debt-averse northern European countries.
But most economists assumed that better times would last only so long as the virus could be contained.
“Consumer activity slowed at the end of September,” said Moritz Degler, a senior economist at Oxford Economics in London, in a recent report. “With the health situation unlikely to improve in the near term, we expect the recovery to slow again over the next few weeks.”
Fall has also brought a realization that complex hurdles remain before the European Union’s relief fund can be administered, limiting prospects in the worst-hit countries like Spain and Italy.
Spanish Prime Minister Pedro Sánchez on Wednesday announced a stimulus spending plan worth 72 billion euros ($85 billion), with four-fifths of the money slated to come from the European fund.
Spain may have to wait for that money. The fund is supposed to be operational by January, yet almost certainly will confront delays as European Union members debate conditions on its distribution — especially rules aimed at forcing Hungary and Poland to abide by the democratic norms of the bloc.
The continent’s prospects for recovery are further restrained by rules that limit debts by members of the European Union and curb spending. Those strictures have been suspended, but they will return eventually, limiting growth prospects.
Italy is counting on receiving 209 billion euros ($246 billion) from the European relief fund, but the government is also pledging to bring down its public debt, which exceeded 134 percent of annual economic output at the end of last year. Such austerity, just as the pandemic increases costs for medical care, will almost certainly plunge Italy into a longer and deeper recession.
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Stocks were heading higher again on Friday, after a turbulent week in which President Trump injected confusion into the stimulus talks between the Treasury Department and Congress, halting them and then restarting them again.
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On Wall Street, the S&P 500 climbed about half a percent in early trading, on track to end the week with a gain of nearly 3 percent. The Stoxx Europe 600 index rose 0.3 percent on Friday, and was up 1.9 percent for the week.
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“Today’s market driver is President Trump’s apparent willingness to consider a bigger fiscal package ahead of the election than earlier indicated,” said Kit Juckes, a strategist at Société Générale.
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Mr. Trump’s comments on Thursday that he was interested in a broad bill came just two days after he called off talks entirely, and the on-again, off-again nature of the talks this week has left investors uncertain about the prospects of an actual deal.
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On Thursday, Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin held an afternoon phone call to discuss the prospects of a broad stimulus bill, to aid small businesses, local governments and out-of-work Americans, rather than one just focused on the airline industry.
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“Their conversation focused on determining whether there is any prospect of an imminent agreement on a comprehensive bill,” Ms. Pelosi’s spokesman said on Twitter.
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The talks come as the number of virus cases around the world rises, and the recovery in major economies — including the United States — show signs of losing steam. Britain on Friday said its gross domestic product rose 2.1 percent in August over the month before, less than expected and the smallest monthly increase since the economy started expanding again in late spring. The British economy is still 9 percent smaller than it was before the pandemic.
Britain’s economic recovery from the coronavirus pandemic has already lost its momentum as the country faces a challenging winter. According to data published Friday, gross domestic product rose 2.1 percent in August from the previous month, far below economists’ expectations and the slowest increase since the recovery began in late spring.
More than half the economic gains came from the hospitality sector, including hotels and restaurants, as people vacationed closer to home and the government’s “Eat Out to Help Out” program of meal discounts seemed to really help growth. Still, the overall economy was 9 percent smaller than it was in February before the pandemic.
Britain’s difficulties are echoed across Europe, where a benign summer has given way to a rapid increase in coronavirus cases and new social restrictions that are likely to curtail economic growth. In anticipation of more restrictions from the government, Britain’s Treasury on Friday introduced more job support measures, just two weeks after the latest plans were announced. Starting next month, the government will pay two-thirds of staff wages at companies that are legally required to close their doors, for example if bars and restaurants are told to shut again. The government also announced increased grants to these businesses.
The National Institute of Economic and Social Research in London said it now expected growth to stall in September. Analysts at Citigroup and Bank of America also cut their forecasts for economic growth for the rest of the year.
“August now seems to have been, ‘as good as it gets’ with respect to either formal restrictions or levels of virus fear,” Citigroup’s economists wrote. “During the latter part of the year, we expect lingering virus concerns and ongoing restrictions to preclude any further rebound.”
The Trump administration levied tariffs on $1.96 billion of imported aluminum sheet from 18 countries on Friday, saying that foreign producers were selling their products at unfairly low prices and undercutting American manufacturers.
In an interview on Fox Business Network on Friday morning, Wilbur Ross, the secretary of commerce, called the move “the largest and most far-reaching case that our department has brought in more than 20 years.” He said Germany would feel the largest impact, followed by Bahrain.
Mr. Ross traced part of the problem back to China. He said China was dumping its excess capacity into other markets, which would then find its way into the United States. “The net effect is a lot of dumping in the U.S., and that’s what we’re clamping down on,” he said.
The United States, which imported $15.9 billion of aluminum in 2019, has already imposed a 10 percent tariff on imported aluminum from many countries, though Canada, Mexico and others have earned certain exemptions. Some American aluminum makers support the tariffs, but the levies have angered many manufacturers that make cars, boats, recreational vehicles, washing machines and other products, and now have to pay higher prices for their raw materials.
The U.S. government typically brings dozens of trade cases against foreign countries every year for unfairly subsidizing and pricing their products. But the Trump administration has been particularly aggressive in pursuing and welcoming such cases from various industries, and has initiated 286 of them so far during its term.
The tariffs, which went into effect immediately, apply to products from Bahrain, Brazil, Croatia, Egypt, Germany, Greece, India, Indonesia, Italy, Oman, Romania, Serbia, Slovenia, South Africa, South Korea, Spain, Taiwan and Turkey. The tariff rates vary by country and range up to 353 percent of the cost of the good.
Several U.S. aluminum manufacturers requested the tariffs, including Arconic, Novelis Corporation, Texarkana Aluminum and Constellium Rolled Products Ravenswood.
The Commerce Department will begin collecting the levies immediately, but they could still be struck down and retroactively reimbursed. The U.S. International Trade Commission will make its final decision on the case on April 5, 2021, the Commerce Department said.
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The next Pixar movie, “Soul,” will be made available online instead of in theaters because of the pandemic, the Walt Disney Company said. The film, about a jazz musician who is magically transported to an otherworldly place where personalities are created, will arrive on Disney+ on Dec. 25 at no additional cost to subscribers (unlike the recent “Mulan,” which was accessible for a $30 surcharge). “Soul” had been scheduled for theatrical release on Nov. 20.
Thursday, Oct. 8
Pelosi rules out airlines-only aid plan as President Trump claims stimulus talks are back on.
Speaker Nancy Pelosi of California on Thursday said she would not agree to stand-alone aid package for airlines unless the Trump administration committed to a broader pandemic relief plan to help struggling Americans, declaring that “there is no stand-alone bill without a bigger bill.”
Her comments cast doubt on the prospects for a compromise just hours after President Trump had given an upbeat assessment, saying in an interview that he had reconsidered his decision to pull the plug on bipartisan negotiations on a stimulus plan until after the election.
“I shut down talks two days ago because they weren’t working out,” Mr. Trump said during a wide-ranging interview on Fox Business. “Now they’re starting to work out.”
The U.S. budget deficit topped a record $3 trillion for the 2020 fiscal year.
The federal budget deficit was $3.1 trillion for the 2020 fiscal year, the Congressional Budget Office estimated on Thursday. The deficit is a record for the United States in terms of total dollars and is a direct result of the federal response to the coronavirus pandemic.
Federal spending from April through the end of September was $4.2 trillion, nearly double the same period in 2019, the budget office reported. Individual and corporate income tax receipts fell by $191 billion, or about 17 percent, in April through September, compared with the year before.
Wednesday, Oct. 7
Fed officials warned of slower growth without more stimulus, minutes show.
Federal Reserve officials were counting on Congress and the White House to pass additional aid for households and businesses hit by the pandemic when they released their latest economic forecasts, minutes from their Sept. 15-16 meeting showed. Many “noted that their economic outlook assumed additional fiscal support and that if future fiscal support was significantly smaller or arrived significantly later than they expected, the pace of the recovery could be slower than anticipated,” according to notes from the meeting.
More than 100 million are at risk of poverty, the World Bank says.
The World Bank warned on Wednesday that the coronavirus pandemic could push more than 100 million people into extreme poverty this year, elevating the global poverty rate for the first time in more than two decades. In a new report, the bank said that 88 million to 115 million people will be living on less than $1.90 a day, lifting the poverty rate — which had been projected to decline this year before the pandemic hit — as high as 9.4 percent.
Tuesday, Oct. 6
Powell warns of prolonged economic pain without more aid.
The Federal Reserve chair, Jerome H. Powell, delivered a message to his fellow policymakers on Tuesday: Faced with a once-in-a-century pandemic that has inflicted economic pain on millions of households, go big.
“Too little support would lead to a weak recovery, creating unnecessary hardship for households and businesses,” Mr. Powell said in remarks prepared for virtual delivery before the National Association for Business Economics.
Nearly 16,000 cases in the U.K. weren’t counted because of a spreadsheet glitch.
Nearly 16,000 positive coronavirus cases recently went unrecorded in England’s tracking system, officials said on Monday. The glitch led to an undercount of the country’s tally and a delay in tracing infected people’s contacts, leaving tens of thousands of people in the dark about their potential exposure.
The culprit was a spreadsheet snafu, explains the DealBook newsletter. Specifically, the system relied on files formatted for an older version of Microsoft Excel, which can only handle a certain number of cells. When key files got too big, thousands of entries were skipped. To fix the problem, large files are now split before feeding them into the system — in other words, more spreadsheets.
Monday, Oct. 5
The owner of Regal Cinemas is closing its U.S. theaters, with 40,000 jobs at stake.
The plight of the entertainment industry deepened on Monday as the British company Cineworld, which owns Regal Cinemas in the United States, said it would temporarily close all 663 of its movie theaters in the United States and Britain. The move was expected to affect 40,000 employees in the United States and 5,000 in Britain.
The company said it could not entice viewers back without a pipeline of new films. The news came after Metro-Goldwyn-Mayer announced on Friday it would push back the release date of the latest James Bond film, “No Time to Die,” to April from this fall — the second time its release date has been delayed because of the pandemic.
Some corporate executives have seen their wealth soar this year, thanks to stock awards that have gained in value as the stock market rebounded from its plunge at the start of the coronavirus pandemic.
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Edward W. Stack, the chief executive of Dick’s Sporting Goods, and William Lynch, president of Peloton, for example, are each sitting on paper gains of over $60 million on stock-based awards they mostly received in the first three months of the year, according to an analysis by Institutional Shareholder Services.
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And Stéphane Bancel, the chief executive of Moderna, a drug maker developing a coronavirus vaccine, received options in February that have appreciated by nearly $30 million.
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Some executives at companies that have been hit hard by the pandemic have still done well. In March, William J. Hornbuckle, chief executive of MGM Resorts International, gave up the remainder of his 2020 salary in exchange for restricted stock units worth $700,000, the amount of his forgone salary. After MGM stock recovered somewhat from the lows it plumbed in March, that grant is worth $1.3 million on paper — and all his 2020 awards have appreciated by a combined $4 million.
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Not all executives have gains on their 2020 grants, because many companies have struggled in the pandemic. ISS found that 1,675 “named executive officers,” or the executives who appear in proxies, had gains while 1,388 had losses, as of Wednesday’s closing stock prices. The average appreciation was nearly $1.5 million and the average loss $827,000.
One reason stock awards have appreciated so much is that some of the grants were made when the stock market was close to its lowest point for the year. Of course, many executives are also sitting on gains on stock they got in earlier years.
Target and Ford Motor on Thursday said they would allow employees to continue to work from home through June 2021, as coronavirus cases continue to climb in the United States and companies struggle to figure out how to arrange offices in a way that keeps workers socially distanced and safe.
Target’s decision, announced in a letter to staff, applies just to employees at its headquarters, in Minneapolis. The company said that a small number of employees who rely on the headquarter facilities would continue to work on-site. The retailer also said it was using this time as an opportunity to reimagine the role of its office in a post-pandemic era.
“As we look to the future, our headquarters environment will include a hybrid model of remote and on-site work,” Target wrote in the letter. “This will allow for the flexibility many of you have come to value, while also providing opportunity for the in-person connection and collaboration that’s central to our team and culture.”
Ford also said its decision would apply to its roughly 32,000 employees in North America who are already working remotely.
The announcements by Ford and Target come after several other companies, including Google, Uber and Slack, have decided that employees need not return to the office until at least next summer.
Some companies have tried bringing employees back to the office, but not always successfully. Last month, Goldman Sachs and JPMorgan had to send some workers back home after employees tested positive for the virus.
What started as a coronavirus stopgap is likely to have a permanent impact on the way people shop, along with giving them a new reason to continue to visit beleaguered physical stores.
The popularity of curbside pickup reveals that the future of retail is not just more packages piling up on people’s doorsteps. Beyond satisfying the need for contactless shopping in the pandemic, it taps into Americans’ desire to drive to a store, a pull that can be just as strong as, or even stronger than, the convenience of home delivery.
“Americans are used to their cars and actually do like stores, so this is kind of a hybrid where you’re getting the best of both worlds,” said Oliver Chen, a retail analyst at Cowen.
The rise in curbside pickup, part of a larger surge in e-commerce sales, has implications for preserving retail jobs, though workers’ duties are likely to transform. It is also helping to keep brick-and-mortar spaces relevant when thousands of storefronts have emptied out as more customers move online.
Nowhere is the shift more significant than at big-box chains that also sell groceries. The 700 percent growth in Target’s Drive Up offering has spurred the chain to add fresh and frozen groceries to the service and create up to 12 additional parking spaces for pickup at stores. It has announced plans to double the number of store employees dedicated to in-store and curbside pickup services during this holiday season. The retailer has even included product samples in orders.
Walmart, with about 4,700 stores in the United States, was one of the earliest chains to offer curbside pickup, with a focus on groceries. Curbside orders are part of an overall boost in its e-commerce sales, which accounted for 11 percent of the chain’s revenue in the quarter that ended July 31, up from 6 percent a year earlier.