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Global Economic Policymakers Scramble as Coronavirus Threatens Growth Global Economic Policymakers Scramble as Coronavirus Threatens Growth
(about 13 hours later)
Global policymakers moved to ease public anxiety over the coming economic hit from the coronavirus on Monday, as analysts warned of a severe slowdown in growth and a possible recession if the virus continued to spread.Global policymakers moved to ease public anxiety over the coming economic hit from the coronavirus on Monday, as analysts warned of a severe slowdown in growth and a possible recession if the virus continued to spread.
Finance ministers and central bankers from the world’s advanced economies said the Group of 7 would hold an emergency call on Tuesday morning to discuss economic responses to the outbreak. The World Bank and International Monetary Fund signaled they were also ready to provide assistance, particularly to poor nations. Monetary policymakers from Japan to Europe on Monday pledged to act as needed to stem any economic fallout as infections spread.Finance ministers and central bankers from the world’s advanced economies said the Group of 7 would hold an emergency call on Tuesday morning to discuss economic responses to the outbreak. The World Bank and International Monetary Fund signaled they were also ready to provide assistance, particularly to poor nations. Monetary policymakers from Japan to Europe on Monday pledged to act as needed to stem any economic fallout as infections spread.
The rush of reassurance came amid increasingly dire economic projections tied to the coronavirus, which is spreading outside of China to South Korea, Italy, France and the United States, idling factories, quarantining workers and curtailing international travel.The rush of reassurance came amid increasingly dire economic projections tied to the coronavirus, which is spreading outside of China to South Korea, Italy, France and the United States, idling factories, quarantining workers and curtailing international travel.
The Organization for Economic Cooperation and Development said global growth could plummet to just 1.5 percent in 2020, far less than the 3 percent it projected before the virus surfaced, should the outbreak sweep through the Asia-Pacific region, Europe and North America. If things get bad enough, Japan and Europe could plunge into recession, the O.E.C.D. warned. Predictions for the United States were nearly as bad: Most analysts expect zero or negative growth in the second quarter, with some forecasting a potential recession before year’s end.The Organization for Economic Cooperation and Development said global growth could plummet to just 1.5 percent in 2020, far less than the 3 percent it projected before the virus surfaced, should the outbreak sweep through the Asia-Pacific region, Europe and North America. If things get bad enough, Japan and Europe could plunge into recession, the O.E.C.D. warned. Predictions for the United States were nearly as bad: Most analysts expect zero or negative growth in the second quarter, with some forecasting a potential recession before year’s end.
That glum outlook sent stocks in Europe temporarily lower, but expectations for a far-reaching global response — including the potential for a coordinated interest rate across central banks — helped to stem market bleeding.That glum outlook sent stocks in Europe temporarily lower, but expectations for a far-reaching global response — including the potential for a coordinated interest rate across central banks — helped to stem market bleeding.
The S&P 500 posted its best gain in more than a year, rising by more than 4.6 percent, amid a surge in interest-rate sensitive sectors such as utilities and real estate. Treasury yields continued to tumble, hitting a record low, as investors bet that the Fed will cut interest rates by half a percentage point at its next meeting.The S&P 500 posted its best gain in more than a year, rising by more than 4.6 percent, amid a surge in interest-rate sensitive sectors such as utilities and real estate. Treasury yields continued to tumble, hitting a record low, as investors bet that the Fed will cut interest rates by half a percentage point at its next meeting.
“It has already stoked expectations of a coordinated cut,” Roberto Perli, a former Federal Reserve researcher who is now an economist at Cornerstone Macro, said in an email following news of the G7 meeting. “If it doesn’t happen, it will only add to market volatility.”“It has already stoked expectations of a coordinated cut,” Roberto Perli, a former Federal Reserve researcher who is now an economist at Cornerstone Macro, said in an email following news of the G7 meeting. “If it doesn’t happen, it will only add to market volatility.”
President Trump joined in pushing for Fed action on Monday, saying that Chair Jerome H. Powell and his colleagues should quickly slash interest rates as economic risk from the virus becomes more stark.President Trump joined in pushing for Fed action on Monday, saying that Chair Jerome H. Powell and his colleagues should quickly slash interest rates as economic risk from the virus becomes more stark.
“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter.“As usual, Jay Powell and the Federal Reserve are slow to act,” he wrote on Twitter.
Later, when asked about the state of the economy amid a tumultuous financial week, the president noted that “the market’s up today” and insisted, “Our country’s very strong economically.”Later, when asked about the state of the economy amid a tumultuous financial week, the president noted that “the market’s up today” and insisted, “Our country’s very strong economically.”
But he said he would like the Federal Reserve to do more to address the financial challenges posed by the spread of the coronavirus.But he said he would like the Federal Reserve to do more to address the financial challenges posed by the spread of the coronavirus.
“I don’t think the Fed’s looking at it,” he said, “but they should be.“I don’t think the Fed’s looking at it,” he said, “but they should be.
A senior administration official, who was not authorized to speak publicly about the administration’s response, said Mr. Trump and his advisers were not discussing any fiscal stimulus measures, such as immediate tax cuts, because they viewed any damage from the coronavirus as likely to be temporary. Still, the official said, the White House wants the Fed to cut rates, in part to halt a decline in commodity prices.A senior administration official, who was not authorized to speak publicly about the administration’s response, said Mr. Trump and his advisers were not discussing any fiscal stimulus measures, such as immediate tax cuts, because they viewed any damage from the coronavirus as likely to be temporary. Still, the official said, the White House wants the Fed to cut rates, in part to halt a decline in commodity prices.
Mr. Powell has not committed to lowering borrowing costs, which are already in a range of 1.5 percent to 1.75 percent, lower than in previous expansions. But he signaled on Friday that the Fed was ready to act to support the economy. Investors now expect the Fed to slash rates by half a percentage point at its March meeting or even before, and see borrowing costs drop as much as a full point lower by the end of the year.Mr. Powell has not committed to lowering borrowing costs, which are already in a range of 1.5 percent to 1.75 percent, lower than in previous expansions. But he signaled on Friday that the Fed was ready to act to support the economy. Investors now expect the Fed to slash rates by half a percentage point at its March meeting or even before, and see borrowing costs drop as much as a full point lower by the end of the year.
Even if the outbreak is mild and mostly contained outside China — the O.E.C.D.’s expected scenario — global growth could be reduced about half a percentage point relative to previous forecasts, according to an update that the group released on Monday ominously titled “Coronavirus: The World Economy at Risk.”Even if the outbreak is mild and mostly contained outside China — the O.E.C.D.’s expected scenario — global growth could be reduced about half a percentage point relative to previous forecasts, according to an update that the group released on Monday ominously titled “Coronavirus: The World Economy at Risk.”
Goldman Sachs economists expect global growth to slump to around 2 percent for the full year, down from their previous 3 percent forecast.Goldman Sachs economists expect global growth to slump to around 2 percent for the full year, down from their previous 3 percent forecast.
Neil Shearing, group chief economist at Capital Economics, wrote in a note Monday that in a good scenario, global growth will fall to 2.5 percent this year — the weakest pace since 2009. In a bad scenario, it could shrink by 0.5 percent, a contraction on a scale with the financial crisis.Neil Shearing, group chief economist at Capital Economics, wrote in a note Monday that in a good scenario, global growth will fall to 2.5 percent this year — the weakest pace since 2009. In a bad scenario, it could shrink by 0.5 percent, a contraction on a scale with the financial crisis.
Growth in the United States is also at risk from the virus, especially if the number of infections continues to rise. Goldman Sachs economists said in a note Sunday that “while the U.S. economy avoids recession in our baseline forecast, the downside risks have clearly grown.”Growth in the United States is also at risk from the virus, especially if the number of infections continues to rise. Goldman Sachs economists said in a note Sunday that “while the U.S. economy avoids recession in our baseline forecast, the downside risks have clearly grown.”
Deutsche Bank’s economics team changed its baseline forecast to expect the economy to shrink in the second quarter, with the stock market falling 20 percent below its recent peak, before rebounding in the fall. Its new “worse case” forecast sees the United States entering recession before year end.Deutsche Bank’s economics team changed its baseline forecast to expect the economy to shrink in the second quarter, with the stock market falling 20 percent below its recent peak, before rebounding in the fall. Its new “worse case” forecast sees the United States entering recession before year end.
The exact outcome is hard to quantify because the risks posed by the coronavirus are inherently unpredictable.The exact outcome is hard to quantify because the risks posed by the coronavirus are inherently unpredictable.
It is unclear how far infections will spread, making it difficult to estimate the economic fallout from such actions as widespread quarantines and supply chain disruptions. Outbreaks in China, Japan, Iran, Italy and South Korea have already closed many factories and slowed or halted tourism. Even in the United States, which has had few cases, major companies like Twitter and Amazon have curbed business travel.It is unclear how far infections will spread, making it difficult to estimate the economic fallout from such actions as widespread quarantines and supply chain disruptions. Outbreaks in China, Japan, Iran, Italy and South Korea have already closed many factories and slowed or halted tourism. Even in the United States, which has had few cases, major companies like Twitter and Amazon have curbed business travel.
The economic impact is slowly filtering through the real economy. Priya Misra, a rates strategist, spends a lot of time thinking about the path of economic growth, so it raised alarm bells in her mind when her employer, TD Securities, cut her international business trip short last week.The economic impact is slowly filtering through the real economy. Priya Misra, a rates strategist, spends a lot of time thinking about the path of economic growth, so it raised alarm bells in her mind when her employer, TD Securities, cut her international business trip short last week.
It was part of the company’s new ban on nonessential trips. Her concern only grew on Monday, as clients who were planning to come to her from other parts of the United States rescheduled in-person meetings to phone calls. And it crescendoed when an out-of-town client told her not to drive to their office — outsiders were no longer allowed into the building.It was part of the company’s new ban on nonessential trips. Her concern only grew on Monday, as clients who were planning to come to her from other parts of the United States rescheduled in-person meetings to phone calls. And it crescendoed when an out-of-town client told her not to drive to their office — outsiders were no longer allowed into the building.
Updated June 5, 2020Updated June 5, 2020
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.The unemployment rate fell to 13.3 percent in May, the Labor Department said on June 5, an unexpected improvement in the nation’s job market as hiring rebounded faster than economists expected. Economists had forecast the unemployment rate to increase to as much as 20 percent, after it hit 14.7 percent in April, which was the highest since the government began keeping official statistics after World War II. But the unemployment rate dipped instead, with employers adding 2.5 million jobs, after more than 20 million jobs were lost in April.
Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.Mass protests against police brutality that have brought thousands of people onto the streets in cities across America are raising the specter of new coronavirus outbreaks, prompting political leaders, physicians and public health experts to warn that the crowds could cause a surge in cases. While many political leaders affirmed the right of protesters to express themselves, they urged the demonstrators to wear face masks and maintain social distancing, both to protect themselves and to prevent further community spread of the virus. Some infectious disease experts were reassured by the fact that the protests were held outdoors, saying the open air settings could mitigate the risk of transmission.
Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.Exercise researchers and physicians have some blunt advice for those of us aiming to return to regular exercise now: Start slowly and then rev up your workouts, also slowly. American adults tended to be about 12 percent less active after the stay-at-home mandates began in March than they were in January. But there are steps you can take to ease your way back into regular exercise safely. First, “start at no more than 50 percent of the exercise you were doing before Covid,” says Dr. Monica Rho, the chief of musculoskeletal medicine at the Shirley Ryan AbilityLab in Chicago. Thread in some preparatory squats, too, she advises. “When you haven’t been exercising, you lose muscle mass.” Expect some muscle twinges after these preliminary, post-lockdown sessions, especially a day or two later. But sudden or increasing pain during exercise is a clarion call to stop and return home.
States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.States are reopening bit by bit. This means that more public spaces are available for use and more and more businesses are being allowed to open again. The federal government is largely leaving the decision up to states, and some state leaders are leaving the decision up to local authorities. Even if you aren’t being told to stay at home, it’s still a good idea to limit trips outside and your interaction with other people.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.Taking one’s temperature to look for signs of fever is not as easy as it sounds, as “normal” temperature numbers can vary, but generally, keep an eye out for a temperature of 100.5 degrees Fahrenheit or higher. If you don’t have a thermometer (they can be pricey these days), there are other ways to figure out if you have a fever, or are at risk of Covid-19 complications.
The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.The C.D.C. has recommended that all Americans wear cloth masks if they go out in public. This is a shift in federal guidance reflecting new concerns that the coronavirus is being spread by infected people who have no symptoms. Until now, the C.D.C., like the W.H.O., has advised that ordinary people don’t need to wear masks unless they are sick and coughing. Part of the reason was to preserve medical-grade masks for health care workers who desperately need them at a time when they are in continuously short supply. Masks don’t replace hand washing and social distancing.
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.If you’re sick and you think you’ve been exposed to the new coronavirus, the C.D.C. recommends that you call your healthcare provider and explain your symptoms and fears. They will decide if you need to be tested. Keep in mind that there’s a chance — because of a lack of testing kits or because you’re asymptomatic, for instance — you won’t be able to get tested.
“That’s why I think the growth impact is still not understood — people don’t travel, people don’t plan vacations,” she said. “Manufacturing was already weak, but will we now see it in consumer spending?”“That’s why I think the growth impact is still not understood — people don’t travel, people don’t plan vacations,” she said. “Manufacturing was already weak, but will we now see it in consumer spending?”
If they last, preventive measures like travel limits and partial quarantine could have far-reaching implications. Airlines, hotels and conference centers might suffer. Consumer spending, the backbone of an 11-year-long economic expansion in the United States, could weaken.If they last, preventive measures like travel limits and partial quarantine could have far-reaching implications. Airlines, hotels and conference centers might suffer. Consumer spending, the backbone of an 11-year-long economic expansion in the United States, could weaken.
In China, where the virus has raged for about two months, data already suggest unexpectedly large economic costs. Two gauges of manufacturing activity slumped in February, with the Caixin manufacturing index falling to the lowest level in its history, according to data released Monday. Real-time trackers of Chinese activity, from coal consumption to property sales, remain severely depressed.In China, where the virus has raged for about two months, data already suggest unexpectedly large economic costs. Two gauges of manufacturing activity slumped in February, with the Caixin manufacturing index falling to the lowest level in its history, according to data released Monday. Real-time trackers of Chinese activity, from coal consumption to property sales, remain severely depressed.
Central banks have pre-emptively signaled that they stand ready to act as the damage mounts. The Bank of Japan, European Central Bank and Bank of England issued statements of their own on Monday, signaling preparedness.Central banks have pre-emptively signaled that they stand ready to act as the damage mounts. The Bank of Japan, European Central Bank and Bank of England issued statements of their own on Monday, signaling preparedness.
“The Fed-led pivot reflects the global spread of the virus and its economic disruptions, sharp equity market weakness and an emerging realization that corporate cash flow problems could create strains in credit markets,” Krishna Guha and Ernie Tedeschi at Evercore ISI wrote in a note after the announcements.“The Fed-led pivot reflects the global spread of the virus and its economic disruptions, sharp equity market weakness and an emerging realization that corporate cash flow problems could create strains in credit markets,” Krishna Guha and Ernie Tedeschi at Evercore ISI wrote in a note after the announcements.
But central bankers have far less room to loosen monetary policy today than they did heading into the 2007 recession. In the United States, the federal funds rate was above 5 percent back then and was ultimately lowered to near zero.But central bankers have far less room to loosen monetary policy today than they did heading into the 2007 recession. In the United States, the federal funds rate was above 5 percent back then and was ultimately lowered to near zero.
Laurence Boone, chief economist at the O.E.C.D., said in a conference call on Monday that she welcomed expressions of resolve by central banks, but that the onus was also on elected officials.Laurence Boone, chief economist at the O.E.C.D., said in a conference call on Monday that she welcomed expressions of resolve by central banks, but that the onus was also on elected officials.
“Regardless of how the virus spreads in coming days and months, we call on governments to take action now,” Ms. Boone told reporters.“Regardless of how the virus spreads in coming days and months, we call on governments to take action now,” Ms. Boone told reporters.
Political leaders could provide incentives for companies to shorten work hours rather than lay people off, or delay tax payments for small businesses suffering from plunging sales, for example. Ms. Boone said it would be “a very positive signal” if the United States and China were to drop the tariffs they had imposed as part of a trade war.Political leaders could provide incentives for companies to shorten work hours rather than lay people off, or delay tax payments for small businesses suffering from plunging sales, for example. Ms. Boone said it would be “a very positive signal” if the United States and China were to drop the tariffs they had imposed as part of a trade war.
“This is not a shock that central banks alone can address,” Ms. Boone said.“This is not a shock that central banks alone can address,” Ms. Boone said.
While officials in the United States wait for the Fed to act, government help is more forthcoming in parts of Europe. Italy has already announced a stimulus package, and the French finance minister, Bruno Le Maire, said on Monday that the government would “unlock whatever it takes” to help French companies.While officials in the United States wait for the Fed to act, government help is more forthcoming in parts of Europe. Italy has already announced a stimulus package, and the French finance minister, Bruno Le Maire, said on Monday that the government would “unlock whatever it takes” to help French companies.
“We will show complete solidarity vis-à-vis all contractors that today are on the front line,” he said.“We will show complete solidarity vis-à-vis all contractors that today are on the front line,” he said.
Liz Alderman, Matt Phillips and Jim Tankersley contributed reporting.Liz Alderman, Matt Phillips and Jim Tankersley contributed reporting.