Economic News from last week

June 21 – Bloomberg (John Gittelsohn): 

“U.S. home-mortgage delinquencies climbed in May to the highest level since November 2011 as the pandemic’s toll on personal finances deepened. 

The number of borrowers more than 30 days late swelled to 4.3 million, up 723,000 from the previous month, according to… Black Knight Inc. More than 8% of all U.S. mortgages were past due or in foreclosure.” 

June 23 – Financial Times (Joe Rennison and Nikou Asgari): 

“A record number of US companies sought loan amendments in May after rising debts and falling earnings left them at risk of breaching the terms of their borrowing. 

Last month, 43 US issuers of leveraged loans asked their lenders for relief on the conditions attached to their debts. That surpassed the previous high of 25 set in March 2009 for these typically lower-rated borrowers, according to figures from LCD, a unit of S&P Global Market Intelligence.”

June 26 – CNBC (Diana Olick): 

“After declining for three weeks, the number of borrowers delaying their monthly mortgage payments due to the coronavirus rose sharply once again. 

The number of active forbearance plans rose by 79,000 in the past week, erasing roughly half of the improvement seen since the peak of May 22, according to Black Knight… As of Tuesday, 4.68 million homeowners were in forbearance plans, allowing them to delay their mortgage payments for at least three months. This represents 8.8% of all active mortgages… Together, they represent just over $1 trillion in unpaid principal.” 

June 24 – Bloomberg (Katya Kazakina and Michael Sasso):

 “In states from Arizona to Texas and Florida where Covid-19 is flaring up, small businesses lare seeing a drop in demand, salons report that customers are getting more skittish, and some restaurants and bars had to shut down again after reopening” 

June 25 – Reuters (Sharon Bernstein):

 “California Governor Gavin Newsom… declared a budget emergency in the most populous U.S. state, blaming expenses and the economic downturn caused by the COVID-19 pandemic. 

Declaring a budget emergency allows the state to tap into its rainy day fund. California anticipates a $54.3 billion budget deficit due to costs and a drop in revenue linked to the pandemic. Under a deal reached with lawmakers, the state would use about $16 billion from the rainy day fund over the next three years to help right its budget…” 

June 23 – The Hill (Justin Wise):

“Texas Gov. Greg Abbott (R) is imploring residents to stay home as the state grapples with a surge in coronavirus cases and hospitalizations stemming from the disease… 

‘First, we want to make sure that everyone reinforces the best safe practices of wearing a mask, hand sanitization, maintaining safe distance, but importantly, because the spread is so rampant right now, there’s never a reason for you to have to leave your home. Unless you do need to go out, the safest place for you is at your home.’” 

June 25 – Reuters (Julie Steenhuysen and Kate Kelland): 

“Developing a COVID-19 vaccine in record time will be tough. 

Producing enough to end the pandemic will be the biggest medical manufacturing feat in history. That work is underway. From deploying experts amid global travel restrictions to managing extreme storage conditions, and even inventing new kinds of vials and syringes for billions of doses, the path is strewn with formidable hurdles, according to Reuters interviews with more than a dozen vaccine developers and their backers. Any hitch in an untested supply chain - which could stretch from Pune in India to England’s Oxford and Baltimore in the United States - could torpedo or delay the complex process.” 

June 24 – CNBC (Noah Higgins-Dunn): 

“Travelers arriving in New York, New Jersey and Connecticut from Florida, Texas and other states with spiking Covid-19 infections rates will be subject to a 14-day quarantine and fines if they don’t self-isolate, New York Gov. Andrew Cuomo said… ‘We worked very hard to get the viral transmission rate down. We don’t want to see it go up because a lot of people come into this region and they can literally bring the infection with them,’ Cuomo said…” 

June 23 – New York Times (Matina Stevis-Gridneff): 

“European Union countries rushing to revive their economies and reopen their borders after months of coronavirus restrictions are prepared to block Americans from entering because the United States has failed to control the scourge… 

That prospect, which would lump American visitors in with Russians and Brazilians as unwelcome, is a stinging blow to American prestige in the world…”

June 25 – CNBC (Silvia Amaro): 

“The International Monetary Fund has warned that the ongoing disconnect between financial markets and the real economy could lead to a correction in asset prices.

 In recent months, equity markets have rallied despite troubling real-world events. The world is grappling with the coronavirus health emergency that has taken the lives of almost 500,000 people…, and threatens to cause an unprecedented economic crisis. In addition, there is social unrest in many advanced economies as citizens demand a more equal society, which could hit investor confidence.” 

June 23 – Bloomberg (David Caleb Mutua):

 “Companies shoring up cash to survive the global pandemic raised funds in the U.S. high-yield market at the fastest monthly pace ever. 

Junk issuers have already sold $46.7 billion of bonds in June, surpassing the prior monthly record of $46.4 billion in September 2013…”

June 24 – CNBC (Silvia Amaro): 

“The International Monetary Fund now estimates a contraction of 4.9% in global gross domestic product in 2020, lower than the 3% fall it predicted in April. ‘

The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast,’ the IMF said"

June 25 – Reuters (Marc Jones): 

“Canada became the latest country to be stripped of a prized ‘triple A’ sovereign credit rating after Fitch downgraded it… 

After Wednesday’s downgrade of Canada, Fitch now has the fewest ‘AAAs’ since 1998. It now rates 10 sovereigns ‘AAA’, which, at less than 10% of rated sovereigns, is the smallest ever share of the sovereign portfolio.”

June 24 – Wall Street Journal (Chong Koh Ping):

 “A distressed energy-trading company overstated its assets by more than $3 billion using ‘routine and pervasive’ forgery, while its founder oversaw years of disastrous bets on oil derivatives, 

a report filed with a Singapore court said. The study by interim judicial managers… offers the first detailed account of the implosion of Hin Leong Trading Pte. Ltd., a closely held Singapore company that owes $3.5 billion—mostly to banks, including HSBC Holdings PLC.”

June 24 – Bloomberg (Bryce Baschuk): 

“The U.S. is weighing new tariffs on $3.1 billion of exports from France, Germany, Spain and the U.K., 

adding to an arsenal the Trump administration is threatening to use against Europe that could spiral into a wider transatlantic trade fight later this summer. The U.S. Trade Representative wants to impose new tariffs on European exports like olives, beer, gin and trucks, while increasing duties on products including aircrafts, cheese and yogurt…” 

June 21 – CNBC (Hugh Son): 

“It’s the banking world’s version of the rich getting richer. A record $2 trillion surge in cash hit the deposit accounts of U.S. banks since the coronavirus first struck the U.S. in January, 

according to FDIC data. The wall of money flowing into banks has no precedent in history: in April alone, deposits grew by $865 billion, more than the previous record for an entire year.”

June 25 – Bloomberg (Elizabeth Dexheimer): 

“U.S. exports sank to the lowest in more than a decade while imports dropped as the coronavirus continued to curtail demand for goods and upset producers’ supply chains. 

Goods exports plummeted 5.8% in May from the prior month to $90.1 billion, the lowest since August 2009… Imports decreased 1.2% to $164.4 billion… The goods-trade deficit widened to $74.3 billion, the biggest since June last year, from a revised $70.7 billion a month earlier.” 

June 23 – Wall Street Journal (Justin Lahart): 

“An analysis conducted by nonpartisan research group Opportunity Insights of credit- and debit-card data collected by Affinity Solutions 

shows that by early April, spending by U.S. consumers had fallen 33% from January levels. Then starting in mid-April, when many Americans began receiving stimulus payments, things started picking up. As of June 17, spending was off by just 8.9%.” 

June 23 – CNBC (Diana Olick): 

“Sales of newly built homes jumped far more than expected, up nearly 13% annually… 

After slowing dramatically in March, as the coronavirus shut down the economy, they posted the strongest May pace since 2007, a recovery that surprised even the builders themselves. But housing starts were not nearly as strong, and builders are struggling to meet this new demand. A telling point in the data: The biggest sales jump came in homes not yet started. That caused the supply of homes for sale that were under construction to drop 15% compared with a year ago.” 

June 25 – Associated Press (Paul Wiseman): 

“Orders to American factories for big-ticket goods rebounded last month from a disastrous April and March as the U.S. economy began to slowly reopen… 

Orders for manufactured goods meant to last at least three years shot up 15.8% in May after plunging 18.1% in April and 16.7% in March… A category that tracks business investment — orders for nondefense capital goods excluding aircraft — rose 2.3% after dropping 6.5% in April. Excluding the transportation sector, which bounces around from month to month, durable goods orders rose a more modest 4%.” 

June 24 – Associated Press (Joyce M. Rosenberg and Ken Sweet): “Americans are likely to see more ‘for rent’ signs in the coming months as many businesses devastated by the coronavirus pandemic abandon offices and storefronts and potentially end a long boom in the nation’s commercial real estate market.

 Hotels, restaurants and stores that closed in March have seen only a partial return of customers, and many may fail. Commercial landlords have already reported an increase in missed rent payments. They expect vacancies to rise through the end of the year. Two trends compound the problem: Office tenants are considering renting less space as more employees work from home, and the trend toward online shopping is accelerating, which could cut already weak demand for retail space in downtown areas and malls.”

June 21 – Financial Times (Derek Brower): 

“US shale companies could be forced to write down $300bn of their assets this year, starting in the second quarter, as operators begin to account for the oil-price collapse on their balance sheets, 

according to a new study. The huge impairments — about half the net value of the companies’ property, plant and equipment — would increase the sector’s leverage from 40% to 54%, triggering insolvencies and restructuring, says the study by Deloitte"

June 23 – Reuters (Sujata Rao): 

“As strict coronavirus lockdowns end, some central bankers have started hinting at another kind of exit — from emergency stimulus they launched just three months ago. 

Markets so far appear to be calling their bluff. The estimated $5 trillion in asset purchases unleashed by the five biggest central banks to cushion the impact of the pandemic has helped lift world stocks to within 10% of record highs, while the global economy seems set for recovery… Some central banks have signaled full-throttle stimulus won’t last for ever…” 

June 21 – Reuters (Valentina Za and Giuseppe Fonte):

 “Italy’s budget deficit, currently projected to reach 10.4% of domestic output this year, is likely to expand further as the country tries to prop up the economy amid the coronavirus pandemic, Prime Minister Giuseppe Conte said…”

June 24 – Bloomberg (Anirban Nag): 

“The International Monetary Fund’s forecast for India’s economy swung from expansion to contraction, marking the sharpest downgrade in projections of the world’s main economies. 

The… lender now sees India’s gross domestic product declining 4.5% in the fiscal year through March 2021, compared with an April projection of 1.9% growth. The 6.4 percentage-point downgrade in the forecast is due to ‘a longer period of lockdown and slower recovery than anticipated in April,’ the IMF said…”

June 26 – Reuters (Dave Graham):

 “Mexico’s economy posted a record contraction in April…, 

as the effects of the coronavirus lockdown devastated economic activity, particularly in manufacturing. Adjusted for seasonal swings, Latin America’s second-biggest economy contracted 17.3% from March, the biggest fall since modern data began being published in early 1993…”