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Consumers Lead the Way
The first stage of the recovery looks V-shaped. After bottoming out in April, economic activity has continued to rise into early June, according to a range of private data. Whether the recovery can continue at this pace remains clouded by uncertainty over future fiscal stimulus, resurgent infections and the drag of unprecedented job loss on consumer finances. Nonetheless, an L-shaped recovery, in which activity stays depressed, now looks remote. And while the overall recovery may not end up a V, it may also be less feeble than many had feared, Greg Ip writes.
The strongest evidence comes from consumer spending. In April, retail sales posted their biggest one-month drop on record. The government reports May sales data on Tuesday, and economists expect a 7.9% jump, recouping 40% of April’s decline. Meanwhile, week-to-week patterns point to continued growth into early June. Department store sales in the week ended June 10 were actually above year-earlier levels, according to Facteus, which analyzes transactions by 16 million debit and credit card holders for banks. Grocery, discount, variety and general-merchandise store sales all recorded sales above year-ago levels.
WHAT TO WATCH TODAY
The New York Fed’s Empire State survey for June is expected to rise to minus 35.0 from minus 48.5 a month earlier. (8:30 a.m. ET)
Dallas Fed President Robert Kaplan speaks at a New York University webinar at 11 a.m. ET and San Francisco Fed President Mary Daly speaks on monetary policy at the National Press Club virtual newsmaker series at 12:20 p.m. ET.
Prime Minister Boris Johnson holds Brexit talks with European Commission and Council Presidents.
TOP STORIES
First In, First Out?
Chinese health authorities shut parts of Beijing and adopted tight controls after the capital confirmed a record number of new Covid-19 infections, sparking growing concerns about a coronavirus resurgence. The appearance of a new cluster in Beijing was particularly worrying because authorities had taken extra precautions to keep the capital free of the virus long after other cities had relaxed controls, Sha Hua reports.
Before the latest coronavirus scare, Chinese data was looking up. China’s factory-led recovery enjoyed an extra boost last month as consumers stepped up to make big-ticket purchases, pushing up home prices and auto-sales numbers and prompting economists to increase their growth outlook for the world’s second-largest economy. Official Chinese economic data released Monday showed improvement across a variety of indicators, including in its headline jobless rate, raising optimism for the global economy, Jonathan Cheng reports.
China is a rare bright spot for U.S. exporters. The country has retaken its mantle as America’s largest trading partner after the sides signed a trade pact in which China agreed to sharply step up purchases of U.S. farm products and other goods. Despite the rise, China is so far not on pace to meet purchase terms under the trade pact, Josh Zumbrun reports.
Back to Work
Larry Kudlow, director of the White House National Economic Council, urged lawmakers to replace a $600-a-week boost in unemployment benefits with a return-to-work bonus. Mr. Kudlow said the additional jobless benefits might be dissuading some Americans from going back to work as businesses reopen across the country, Ryan Tracy reports.
Auto makers are grappling with absent U.S. factory workers and Covid-19 cases at their reopened plants, complicating efforts to recoup production lost to the pandemic. The impact on output has been minimal as many plants aren’t yet operating at full capacity, the companies said. Still, the challenges have required auto makers to adjust shifts and add temporary workers. Such moves highlight the complexities businesses face upon reopening as they look to insulate their workplaces from potential outbreaks while restoring moneymaking operations after weeks of lockdown, Ben Foldy and Mike Colias report.
The new coronavirus pandemic and its economic fallout threaten to exacerbate mortality rates for African-Americans, which have risen in recent years for blacks in middle age. Blacks are dying at disproportionately high rates from the coronavirus, and their unemployment rate has tripled as a result of the pandemic. The financial stress, along with long-simmering racial tensions highlighted by the May 25 killing of George Floyd while in the custody of Minneapolis police, may compound factors that have been shown to worsen the health of African-Americans, Janet Adamy reports.
For Better and For Worse
French President Emmanuel Macron said he would accelerate the timetable for lifting the remaining lockdown restrictions in a bid to get France’s economy back on its feet. On Monday, the government will reclassify the Paris region as a so-called green zone, which means all bars and restaurants will be able to fully reopen in the capital. With the French economy expected to shrink by 11% this year, Mr. Macron said he would now shift his priority to reviving growth, Nick Kostov reports.
Peru is grappling with Latin America’s worst coronavirus outbreak outside of Brazil. But unlike Brazil, Peru was applauded for swiftly implementing strict policies to keep people home. The country’s plight shows how broad measures like a lockdown can be undermined by structural problems. In Peru, those include a rundown health system, a huge informal economy in which 70% of the workforce has no social safety net, and deep inequality that means most people don’t have bank accounts or refrigerators, with many others lacking running water, Ryan Dube reports.
QUOTE OF THE DAY
“Systemic racism is a yoke that drags on the American economy. This country has both a moral and economic imperative to end these unjust and destructive practices.” —Atlanta Fed President Raphael Bostic
WHAT ELSE WE’RE READING
Do economic downturns fuel racial animus? “Our empirical strategy exploits pre-recession cross-state variation in the size of two economic sectors particularly affected by the Great Recession: manufacturing and real estate. We find that states that were dependent on these sectors were hit hardest by the Great Recession, experienced the largest increases in racist internet searches, and experienced the largest increases in hate crimes against blacks,” D. Mark Anderson, Benjamin Crost and Daniel Rees write in the Journal of Economic Behavior & Organization.
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