Economic and financial news from last week

August 12 – 

Associated Press (Stan Choe, Alex Veiga and Christopher Rugaber): 

“The U.S. and global economies have shown some improvements since the spring, when business lockdowns were widespread, but they are nowhere close to fully healed… Many industries, such as airlines, hotels and dining, could take years to recover from the damage. The Federal Reserve and the U.S. government get a lot of the credit for the stock rally after pouring trillions of dollars into the economy.”

August 12 – 

Financial Times (Mamta Badkar and Eric Platt):

 “ As the earnings season draws to a close, companies within the Russell 2000 stock index — the small-cap benchmark — have reported an aggregate loss of $1.1bn, compared to profits of almost $18bn a year earlier… Meantime, the much bigger companies within the benchmark S&P 500 index have posted a 34% aggregate drop in earnings, to $233bn.”

August 12 – 

Financial Times (Delphine Strauss): 

“The UK economy suffered a bigger slump than any other major European economy in the second quarter, shrinking by a fifth and falling into its deepest recession on record. Official data… showed that gross domestic product fell more than 20% quarter on quarter, with widespread contractions across all sectors.”

August 8 – 

Reuters (David Gaffen): 

“The world’s five largest oil companies collectively cut the value of their assets by nearly $50 billion in the second quarter, and slashed production rates as the coronavirus pandemic caused a drastic fall in fuel prices and demand. The dramatic reductions in asset valuations and decline in output show the depth of the pain in the second quarter.”

August 10 –

 Wall Street Journal (Eric Morath): 

“The federal government spent nearly $250 billion on extra $600-a-week unemployment benefits from early April to the end of July… Workers who permanently lost their jobs, were furloughed or had their hours cut were able to tap $600 in federal unemployment benefits on top of the amount they qualified for from the state, under a relief law Congress passed and President Trump signed in March. The benefits expired on July 31. 

August 10 – 

Bloomberg (Alexandre Tanzi): 

“President Donald Trump’s decision to extend a student-loan freeze will take away a financial risk for tens of millions of U.S. households, who now won’t have to resume paying back about $1.2 trillion of debt until at least 2021. The measure, one of four executive actions Trump took on Aug. 8, keeps both repayments and the accumulation of interest on hold through the end of this year.”

August 12 – 

Reuters (David Lawder): 

“The U.S. federal budget deficit in July brought the fiscal year-to-date deficit to $2.81 trillion, compared to $867 billion for the comparable period of 2019 and doubling the 2009 full-year record deficit of $1.4 trillion.”

August 12 –

 CNBC (Diana Olick): 

“Two straight weeks of record low mortgage rates brought consumers back to their lenders, but rates may now be reversing course… Mortgage applications to purchase a home rose 2% for the week and were a strong 22% higher than the same week one year ago.”

August 11

 – Bloomberg (Madeleine Ngo): 

“Big companies are going bankrupt at a record pace, but that’s only part of the carnage. By some accounts, small businesses are disappearing by the thousands amid the Covid-19 pandemic, and the drag on the economy from these failures could be huge. This wave of silent failures goes uncounted in part because real-time data on small business is notoriously scarce, and because owners of small firms often have no debt, and thus no need for bankruptcy court.”

August 13 – 

Bloomberg (Sally Bakewell):

 “Unprecedented government stimulus has allowed more companies to borrow at lower rates than ever before. Yet amid the credit boom, smaller firms that power America’s economic engine are often being shut out, hamstringing the recovery just as it begins. The Federal Reserve’s pledge to use its near limitless balance sheet to buy corporate bonds has aided stricken airlines, oil drillers and hotels. ... But for companies not large enough to tap fixed-income markets, the outlook is much more dire. Banks are tightening conditions on loans to smaller firms at a pace not seen since the financial crisis, while many direct lenders that have traditionally focused on the middle market are pulling back or turning to bigger deals instead.”

August 9 

– CNBC (Annie Nova): 

“Amid one of the worst downturns in U.S. history, nearly 80% of credit card holders say they’re worried they won’t be able to continue making even the minimum payments on their debt.  The figure comes from a survey by CreditCards.com, which found millennial card holders (91%) are most at risk of missing payments. Meanwhile, 1 in 4 people say the pandemic has pushed them to take on more credit card debt.  Most of the relief measures delivered to Americans in the first stimulus package have dried up, even as the coronavirus pandemic shows no sign of abating.”

August 12 

– Wall Street Journal (Kate Davidson and David Harrison): 

“State and local governments reduced spending at a 5.6% annual rate in the second quarter as they laid off workers and pulled back on services to offset plunging tax revenues. More cuts are on the way. Moody’s Analytics estimates that without additional federal aid, state and local budget shortfalls will total roughly $500 billion over the next two fiscal years. That would shave more than 3 percentage points off U.S. gross domestic product and cost more than 4 million jobs, said Dan White, head of fiscal policy research at Moody’s.”

August 11 

– Bloomberg (Eliza Ronalds-Hannon):

 “Frackers are failing by the dozens, spurring an unusual problem for their suppliers: What to do with thousands of tons of sand parked in hopper cars on America’s railroads. A case in point is Covia Holdings Corp., which received a lecture from Judge David Jones at a bankruptcy hearing last month about the obligation to safely dispose of more than 4,000 leased rail cars, each carrying about 100 tons of superfine frac sand. Most of it is now worse than worthless -- almost no one wants the mineral, and Covia is burning cash on rail car leases, maintenance and storage costs…”

August 12

 – Bloomberg (Oshrat Carmiel): 

“Manhattan apartment rents plunged last month by the most in nearly nine years. That’s only one sign of weakness for the borough’s leasing market. By almost every measure, the news is dismal for landlords, who are trying to keep units filled amid a global pandemic that’s sparked an urban exodus. July’s vacancy rate climbed to a record of 4.33%,.”

August 11 – 

Wall Street Journal (Cezary Podkul): 

“Thousands of commercial-mortgage borrowers have been struggling to meet payments on their loans in the midst of the coronavirus pandemic. But there might be another reason so many are falling behind: aggressive lending practices that overstated borrowers’ ability to repay.

A study of $650 billion of commercial mortgages originated from 2013 to 2019 found that even during normal economic times, the mortgaged properties’ net income often falls short of the amount underwritten by lenders. The underwritten amount should be a conservative estimate of how much a property earns. Instead, the actual net income trails underwritten net income by 5% or more in 28% of the loans, according to the study of nearly 40,000 loans by two finance academics at the University of Texas…”

August 11 – 

Reuters (Yilei Sun and Brenda Goh): 

“China’s auto sales in July climbed 16.4% from a year earlier, the fourth consecutive month of gains as the world’s biggest vehicle market comes off lows hit during the country’s coronavirus lockdown. Sales rose to 2.11 million vehicles in July but are still down 12.7% for the year to date at 12.37 million vehicles…”

August 12 – 

Reuters (Stella Qiu and Brenda Goh):

“China’s aviation regulator said… that passenger numbers in July fell 34.1% from a year earlier. That marked a recovery from a year-on-year decline of 42.4% in June.”

August 10 – 

Financial Times (Mehreen Khan and Tommy Stubbington): 

“The EU’s plan to issue €750bn of bonds to fund its Covid-19 recovery poses no immediate threat to the bloc’s credit rating, according to the biggest agencies, despite big divisions between member states on how to pay the money back. 

The EU’s 27 governments agreed in July a landmark response to the coronavirus crisis by empowering the European Commission to raise €750bn of debt and to hand the proceeds to stricken economies in the form of loans and grants. The deal included a promise to explore new sources of income — such as a European digital tax or levy on carbon imports — to pay back the EU’s biggest ever exercise in joint borrowing. But governments are divided over the levies.”