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Long road to recovery
The rich economies of the world experienced that deepest contraction in at least six decades this spring, while ongoing novel coronavirus outbreaks mean their way back to pre-pandemic production levels is likely to be fraught with problems. The Organization for Economic Co-operation and Development announced on Wednesday that the combined economic performance of its 37 members – most of whom are affluent – was 9.8% lower in the second quarter than in the first, the largest decline since records began in the year 1960. The previous biggest drop in production during a quarter was a 2.3% decrease in 2009 at the height of the global financial crisis, reports Paul Hannon.
Surveys and other data show that economic activity began to recover as early as Maywhen a number of countries lifted some of the virus containment restrictions. Economists expect a strong recovery in the quarter to September. However, there are already signs that resurgent infection rates and the newly imposed restrictions to contain them are and will continue to weigh on growth until a vaccine becomes widely available.
WHAT YOU NEED TO WATCH TODAY
US unemployment claims The week ending August 22nd is expected to drop from 1.106 million the week before to 1 million. Follow our coverage here. (8:30 a.m. ET)
US gross domestic product is expected to fall at an annual rate of 32.4% in the second quarter, revised up slightly from an earlier estimate of minus 32.9%. (8:30 a.m. ET)
Federal Reserve Chairman Jerome Powell Headlines a Kansas City Fed virtual retreat for global central bankers. Mr. Powell speaks at 9:10 a.m. ET.
US home sales are expected to increase by 3.5% in July compared to the previous month. (10 a.m. ET)
The Kansas City Fed The August production survey will take place at 11 a.m. CET.
Japan’s consumer price index for Tokyo for August is at 7:30 p.m. ET and preliminary trade statistics for August are out at 7:50 p.m. ET.
Hurricane Laura hit land near the Texas-Louisiana border in the early hours of Thursday, threatening what forecasters have called deadly floods and widespread wind damage. More than 20% of US refining capacity can be grossly processed four million barrels of oil a dayis within the storm’s potential path. The reaction so far has been subdued, however: energy markets are still overcrowded as the coronavirus pandemic weighs on demand for fuels for transportation Supplies of oil and gasoline remain relatively high.
Durable factory goods orders rose for a third straight month in July Manufacturers increased production and the economy continued to recover from disruptions related to the coronavirus pandemic. Military aircraft and automobiles drove orders for durable goods up. The underlying numbers were more subdued, but showed that demand in the core industries had almost returned to the preandemic level. A closely watched measure of corporate investment – new orders for non-defensive capital goods excluding aircraft – was barely below February’s level. “The recovery in business equipment investment looks pretty V-shaped to us,” said Michael Pearce, senior US economist at Capital Economics.
Don’t you wanna be my neighbor
Millennials, long viewed as perennial renters reluctant or unable to buy a home, are becoming a driving force in the world Recent real estate market recovery. The generation that had been slow to enter the U.S. real estate market reached a milestone early last year when they accounted for more than half of all new home loans for the first time and stayed consistently above that level for the first few months of this year, says Nicole Friedman.
Another real estate trend: bigger is better. An analysis of Redfin sales data shows that sales for large homes grew almost ten times faster than small ones in July. More and more people are looking for work and leisure opportunities, even if it means living further away from the city centers. However, prices for smaller homes are still rising faster, demonstrating the importance of affordability and the consequence of limited supply for buyers, Redfin said.
New central bank mandates
Federal Reserve Chairman Jerome Powell is expected to set a new framework this morning for meeting the central bank’s often elusive target of 2% inflation. When he’s finished, he should keep his jacket on as a variety of other missions await him. In recent years the Fed has been called upon to prevent financial crises, reduce the trade deficit, tackle climate change, and now eliminate racial economic disparities. Mission Creep carries real risks. The Fed is being asked to achieve goals for which its instruments are ill-suited and often conflicted, writes Greg Ip.
Open and close case
South Korea did better than almost any other wealthy country during the pandemic because it never resorted to it mandatory locks. The Covid-19 strategy depended on citizens voluntarily wearing masks and staying indoors, as well as extensive testing and quick contact tracing. Most of the stores stayed open. But now that cases are on the rise, South Korea is at a crossroads: it’s the closest thing to a lockdown the country has ever faced or is missing out on the chance to choke a persistent outbreak in its bud, reports Dasl Yoon.
Germany is stepping up its already impressive stimulus package to support its economy through the Covid-19 pandemicSome economists have dispelled concerns that the state is artificially keeping bankrupt companies alive. Germany Stimulus package Given the size of its economy, it is already dwarfing the support other governments have given to address the economic fallout from the pandemic. Now this gap will widen, report Bertrand Benoit and Tom Fairless.
WHAT WE’LL READ
Hurricane Maria struck Puerto Rico in September 2017, killing approximately 3,000 people, affecting the economy and causing an exodus of workers – many to Orlando, Florida. “We note that employment in Orlando has increased, particularly in construction and retail, and we see a positive impact on the labor market for non-Spanish and less educated workers. While we find that these construction workers’ incomes fell slightly, this was offset by earnings growth in retail and hospitality. These results are consistent with small negative impacts on earnings in sectors exposed to labor supply shock and offset by positive effects in sectors affected by an associated positive shock in consumer demand, ”write Giovanni Peri, Derek Rury and Justin Wiltshire from the University of California, Davis in a working paper.
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