As sections of the global economy tip-toe toward reopening, it’s becoming clearer that a full recovery from the worst slump since the 1930s will be impossible until a vaccine or treatment is found for the deadly coronavirus.
Consumers will stay on edge and companies will be held back as temperature checks and distancing rules are set to remain in workplaces, restaurants, schools, airports, sports stadiums and more.
China — the first major economy consumed by the virus and the first to emerge on the other side — has been able to revive production but not demand. The lesson for other economies: it’ll be a stop-start path back toward normal.
There’s also the risk of new flare ups. Some 108 million people in China’s northeast region have been put back under varying degrees of lockdown amid a new cluster of infections. Doctors there are also seeing the coronavirus manifest differently, suggesting that it may be changing in unknown ways.
In South Korea – where the virus was controlled without a hard lockdown – consumer spending remains weak as infections continue to pop up.
Sweden’s highly contested response left much of the economy open, yet the country is still headed for its worst recession since World War II.
That means global policy makers — who have already announced trillions of dollars of fiscal and monetary support — will need to keep the stimulus flowing to avoid yet more company failures and job losses. Federal Reserve Chairman Jerome Powell has warned that a full recovery will need to wait until the scientists deliver, a warning echoed by his Australian counterpart.
“If we don’t get breakthroughs on the medical front, then I think it’s going to be quite a slow recovery,” Australia’s central bank chief, Philip Lowe, said this week. “We’ve got a lot resting on the shoulders of the scientists here.”
Harvard University professor Carmen Reinhart, who is the incoming chief economist of the World Bank, had a similar message. “We’re not going to have something akin to full normalization unless we (a) have a vaccine and (b) — and this is a big if — that vaccine is accessible to the global population at large,” she told the Harvard Gazette.
With global infections topping 5 million and a death toll of over 330,000, there’s an air of desperation for good news on either a vaccine or effective anti-viral.
Shares in Cambridge, Massachusetts-based Moderna Inc. hit a record on Monday on early data from a small trial of the company’s coronavirus vaccine. It gave up some of those gains in later days as investors weighed the early nature of the vaccine data.
A survey of money managers by Bank of America Corp. found the biggest tail risk is a second wave of the virus that means restrictions will have to be imposed again. Only 10% expect a rapid rebound, the bank said in a note titled “V is for Vaccine”.
The race for a cure has a geopolitical edge too. U.S. President Donald Trump has vowed a Manhattan Project-style effort dubbed “Operation Warp Speed” to develop a cure, while China’s President Xi Jinping has pledged to make one universally available once it’s developed.
The fusion of when successful drugs can be found and when economies can get back to normal is dominating sentiment in financial markets.
“There is a global bounty on the virus,” said Stephen Jen, who runs hedge fund and advisory firm Eurizon SLJ Capital in London. “I don’t see how it is wiser for investors to bet on the virus than to bet on science, technology, and unlimited political and financial capital in the world to contain and defeat the virus.”
Health experts caution that the process for developing an effective immunity will take time – possibly years. And even then it will need distribution on an unprecedented scale, according to Anita Zaidi, Director of Vaccine Development and Surveillance at the Bill & Melinda Gates Foundation.
“I am optimistic we can develop a vaccine by the end of 2020,” she said during a discussion hosted by Bloomberg New Economy. “I am not very hopeful that we can deploy a vaccine for mass use by the end of 2020 because of the unprecedented scale needed to immunize the whole world.”
Deutsche Bank AG economists are working on the basis that a vaccine or a cure won’t be widely available for the next year and a half.
In the meantime, the cogs of global commerce are in limbo. The International Monetary Fund has warned the “Great Lockdown” recession would be the steepest in almost a century. More than 1 billion workers are at high risk of a pay cut or losing their job, the International Labour Organization warned in April. World merchandise trade volume is likely to fall “precipitously” in the first half of 2020, according to the World Trade Organization.
Critically, consumer confidence is shattered. One example: U.K. retail sales dropped by almost a fifth in April.
Bloomberg Economics estimates the lockdowns triggered a drop in activity of around 30% and their research found that the first steps to relax controls will have a more positive impact on activity than later ones.
Central bank chiefs, who have had to resort to considering scenarios instead of hard forecasts, are staying in crisis mode.
Powell has pledged to keep using the Fed’s tools. The Bank of Japan, in an emergency meeting on Friday, launched a new lending program worth 30 trillion yen ($279 billion) to support small businesses as a key inflation gauge slid below zero in April for the first time in more than three years. India’s central bank cut interest rates in an unscheduled announcement on Friday to their lowest since 2000.
While the world waits for a vaccine, workers employed in areas like tourism will need to be reskilled and shifted to where there’s demand, a process that will take time, said Shaun Roache, Asia-Pacific chief economist at S&P Global Ratings.
“Without a medical solution, either a vaccine or effective therapy, persistent behavior change would lead to large structural shifts in the economy,” he said.
Big employers are already adapting to the new, new normal. Facebook Inc. plans to hire more remote workers in areas where the company doesn’t have an office, and let some current employees work from home permanently. JPMorgan Chase & Co. expects to keep its offices half full at the most for the “foreseeable future.”
The circuit breaker to all of this would be a scientific breakthrough, said Torsten Slok, Deutsche Bank Securities Chief Economist.
“A vaccine would change everything,” he said.
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Quebec looks to revive economy weakened by coronavirus crisis by fast tracking infrastructure projects – Global News
Quebec is looking to ramp up 202 infrastructure projects across the province in response to the novel coronavirus pandemic’s toll on the economy.
Bill 61, known as an “Act to restart Quebec’s economy and to mitigate the consequences of the public health emergency” due to the COVID-19 crisis, was unveiled by the government on Wednesday.
As part of the plan, the government wants to accelerate the construction of schools, seniors’ homes, roads and public transit systems. If passed, the bill will allow some projects to be fast tracked without all the regular procedures in place.
Treasury Board President Christian Dubé said the province wants to help people and sectors recover during the health crisis as lockdown measures implemented in March are slowly eased. He insisted that rigor will still be used when it comes to doling out contracts.
“We will not go against laws or regulations,” he said, adding the bill will permit for certain authorizations to be given more quickly.
The proposed legislation will revive the economy and allow for a less bureaucratic process, according to Dubé.
“We know we were all weathering an unusual storm,” he said.
Under the plan, about 90 infrastructure projects would be ramped up in the health sector, including construction on 48 seniors’ homes. This also includes renovation plans for hospitals in Montreal, such as the renovation and expansion of Lachine Hospital.
In the education sector, about 39 projects would be fast tracked. This includes the construction of new elementary and high schools as well as the expansion of other academic institutions such as Dawson College in Montreal.
When it comes to roads and public transit, the Legault government is looking at accelerating about 50 projects. This includes the long-awaited extension to the Montreal Metro’s blue line.
Finance Minister Eric Girard described the situation as “exceptional” when outlining the details of the bill alongside Dubé.
Girard also announced that he will provide an update on the province’s finances on June 19, but warned that the pandemic has had a grip on the economy.
“This year is going to be a negative year,” he said. “The worst year for the economy since World War Two.”
The announcement comes as Quebec saw 291 new cases of COVID-19, the disease caused by the virus, on Wednesday. It leads the country with 51,884 infections.
The death toll stands at 4,794 after 81 more fatalities were reported from the previous day.
As of Wednesday, the number of hospitalizations decreased by 34 for a total of 1,141. There are 158 people in intensive care.
— With files from the Canadian Press
© 2020 Global News, a division of Corus Entertainment Inc.
Mayor Watson asks province to consider local reopening of economy – Ottawa Citizen
Mayor Jim Watson has asked Premier Doug Ford to consider reopening the City of Ottawa’s economy as part of a regional approach to relaxing COVID-19 restrictions.
“Mayor Watson spoke to Premier Ford last night and expressed his support for a more regional approach given our city is doing better than many other parts of the province,” Watson’s press secretary Patrick Champagne said Wednesday morning.
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“As you know, we also have the added challenge of being a border city, creating an unlevel playing field, as businesses like hair salons and barber shops have reopened in Gatineau but not in Ottawa. Premier Ford fully understood our dilemma and committed to keeping the Mayor’s perspective in mind as they consider a regional approach to reopening the Ontario economy.”
Ford last week expressed interest in a regional approach to reopening Ontario’s economy based on COVID-19 testing and results, rather than tweak provincial emergency orders and have the rules apply to the entire province.
US services index shows biggest part of economy is stirring – BNNBloomberg.ca
U.S. service providers started to emerge in May from a pandemic-induced tailspin as nationwide lockdowns on business and social interaction began to lift.
The Institute for Supply Management said Wednesday that its non-manufacturing index rose 3.6 points to 45.4.
While the monthly increase was the largest in more than two years, the gauge remained below the 50 mark that shows most service-related industries continued to contract.
The purchasing managers group’s gauge of business activity, which parallels the ISM’s factory production index, jumped 15 points, the most in records dating back to 1997, to a still-tepid 41. Along with an improvement in new orders, the figures are a welcome sign that the economy is stabilizing and will gradually recover from a deep recession.
The median forecast in a Bloomberg survey of economists called for an improvement to 44.4 in the overall non-manufacturing index.
The report, however, also showed the labor market remains severely disrupted by the pandemic. The ISM measure of employment at services, which represent almost 90 per cent of the economy, only rose 1.8 points from the worst reading on record in April.
A Labor Department report on Friday is projected to show another 8 million decline in May payrolls after an unprecedented 20.5 million slump in April. The unemployment rate is forecast to soar to nearly 20 per cent.
A pickup in demand as states lift lockdowns and businesses begin to reopen is needed to help stabilize the job market. The ISM’s report showed an index orders at service providers climbed 9 points to a still-weak 41.9.
Meanwhile, the index of supplier deliveries in non-manufacturing industries fell for the first time in four months, indicating an easing in supply-chain bottlenecks and transportation delays.
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