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Chimney signals
Factories in the US, Europe and parts of Asia Increased production in July, but the upswing was slowed by weak world trade and pointed to a long and precarious road for the world economy. Export orders were weak in most of the countries surveyed by research firm IHS Markit in July, and activity declined at two export power plants, Japan and South Korea. With the international outlook uncertain, manufacturers in most countries cut costs by cutting jobs in July. In the US, two surveys of purchasing managers showed improved manufacturing activity. Overall, however, the data suggests that easing lockdown restrictions may not be enough to get the global economy going again. Governments, especially those with export-oriented business models, may need to find a way to boost domestic demand to offset the persistent weaknesses in international demand for overseas-made goods, report Tom Fairless, Eun-Young Jeong and Amara Omeokwe.
WHAT YOU NEED TO WATCH TODAY
US factory orders an increase of 5% compared to the previous month is expected for June. (10 a.m. ET)
TOP STORIES
Get ready for the best quarter of economic growth ever
US factory numbers are among the first positive signs of economic growth in the third quarter. Indeed, gross domestic product is expected to have its best quarter yet. Morgan Stanley posted an annualized return of 21.3% for the period and IHS Markit 20.1%. The estimates are obviously quite tentative, but anything close to them would significantly exceed the previous record after World War II: + 16.7% in 1950.
Unfortunately, a jump of 20% is not enough to understand the losses from the first and second quarters. IHS Markit sees GDP of around $ 18 trillion in the third quarter, well below its high in the fourth quarter. Even with a big boom in the third quarter, the coronavirus would have wiped out about three years of profits.
Boom goes the deficit
The US expects this borrow an additional $ 2 trillion in the second half of the year as federal spending to fight the coronavirus pandemic increases. The Treasury Department estimated the government would borrow $ 947 billion from July to September, a record for the quarter, and $ 1.216 trillion from October to December. Senior finance officials said their estimate suggests Congress will eventually pass another round of economic relief. Congress has approved roughly $ 3.6 trillion in new spending since March to help mitigate the effects of the pandemic, Kate Davidson reports.
What’s next on the financial front? Democratic leaders and White House officials sounded cautiously optimistic after another round of talks on Monday about a new one Coronavirus aid package. Siobhan Hughes and Andrew Restuccia said the sides are under increasing pressure to close a deal as millions of Americans forego $ 600 weekly unemployment benefits.
Fiscal Finder Fee: President Trump said he was ready to approve a purchase of the US operations of the Chinese video sharing app TikTok, but only if the government “a lot of money“in exchange. The White House had pushed for a sale to US owners, citing national security risks that the Chinese government could use the personal information collected by the app,” report Bob Davis, Alex Leary and Kate Davidson.
The real world bank
The Federal Reserve has become the world’s backup lender. During two critical weeks in mid-March, the company bought a record $ 450 billion in treasuries from investors eager to raise dollars. By April, the Fed had lent nearly half a trillion dollars more to its overseas counterparts, which was the majority of the emergency loans it had given to fight the coronavirus at the time. The massive engagement was one of the Fed’s most significant and neglected power expansions to date. It eliminated a global dollar shortage, helped stop deep market sell-off, and continues to support global markets today. It founded the Fed as a global guarantor for dollar financingSerena Ng and Nick Timiraos report that they are cementing the role of the US currency as the foundation of the global financial system.
Get out of my cloud
Spend for Cloud services is increasing as companies bring more business applications online to deal with expanded Covid-19 bans, social distancing, and other restrictions. According to research firm Canalys, companies worldwide spent a record $ 34.6 billion on cloud services in the second quarter. This corresponds to an increase of around 11% compared to the previous quarter and 30% compared to the same period of the previous year. Angus Loten reports that spending gains led by Amazon.com’s Amazon Web Services and Microsoft’s Azure cloud unit were driven by increasing enterprise demand for cloud-based collaboration and remote work tools, e-commerce, remote Learning and content streaming were driven.
WHAT WE’LL READ
Automatic stabilizers suggest ad hoc policy responses. “By the time the Cares Act was passed on March 27, millions of workers had been evicted and tens of thousands of businesses had closed. It then took several weeks for the various Cares support provisions to be implemented. Also, when Cares was passed Many expected that the economic crisis would be brief [Federal Pandemic Unemployment Compensation] The program (the $ 600 addition to the UI benefits) expired in late July [Paycheck Protection Program] Loans should only support companies for eight weeks. It now appears that the period of economic weakness will last much longer, especially as Covid-19 cases have risen rapidly again and additional assistance will be needed. Political responses with built-in triggers tied to economic conditions could flexibly and automatically adapt to the developing situation, “write Alexander Bartik of the University of Illinois at Urbana-Champaign and co-authors in a new working paper.
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