U.S. Industrial Production Picked Up Again in June. U.S. manufacturing increased in June for the second straight month, a sign of economic recovery in the weeks before the recent surge in coronavirus cases.
Industrial production—a measure of output at factories, mines and utilities—rose a seasonally adjusted 5.4% in June from May, the Federal Reserve said Wednesday. That was a bigger increase than the 4% rise anticipated by economists surveyed by The Wall Street Journal. (…)
Still, despite the recent gains, the index for the second quarter as a whole fell at an annual rate of 42.6%, the largest quarterly decrease since World War II. (…)
The Fed’s beige book, which compiles business anecdotes from around the country, said employers increased hiring across the country as many businesses reopened. Still, many companies reported new layoffs and said it was difficult to rehire workers given health and safety concerns, child-care needs and expanded unemployment benefits that exceed normal pay for some workers.
Some businesses were concerned the pace of recovery wouldn’t continue if the coronavirus wasn’t contained. In the Cleveland Fed district, more firms cut worker pay, particularly for higher-salaried employees, than in the last beige book’s reporting window.
The pace of economic recovery in St. Louis had slowed since mid-June. “One staffing contact reported small firms were ‘decimated,’ estimating that 5% of their small clients had filed for bankruptcy and expecting up to 25% to do so by the end of the year,” the report said. (…) (WSJ)
China Becomes First Major Economy to Return to Growth Since Pandemic China’s economy expanded 3.2% in the second quarter from the same period a year earlier, rebounding from a historic coronavirus-induced contraction in the first three months of the year.
On Thursday, China said its economy grew 3.2% from a year earlier in the second quarter, as authorities benefited from an aggressive campaign to eradicate the virus within its borders.
In sequential terms, China’s second-quarter growth in gross domestic product represented a 11.5% rebound from the first three months of the year, according to data released by Beijing’s National Bureau of Statistics. For the entire first six months of the year, China’s economy contracted just 1.6% when compared with the first half of 2019.
The growth figure for the second quarter beat a median estimate from economists for 2.6% growth and was at the top end of an unusually wide range of forecasts, from a contraction of 3.1% to growth of 3.5%. It followed a historic 6.8% contraction in the first three months of the year, when Beijing shut down the country in late January as the coronavirus spread across China from the central city of Wuhan. (…)
With the second-quarter growth, China is looking more like a bright spot in a world ravaged by the pandemic. The International Monetary Fund expects China’s economy will grow 1.2% for the full year, which would make it the only large economy to report positive data in 2020. (…)
On Thursday, China reported that its urban surveyed jobless rate dropped to 5.7% in June, compared with 5.9% in May. China’s headline unemployment rate doesn’t factor in many migrant workers, tens of millions of people who lost their jobs during the first three months of the year.
Industrial production, meantime, rose 4.8% in June from a year earlier, in line with expectations and up from a 4.4% increase in May.
Fixed-asset investment dropped 3.1% in the first half of the year, improving from a 6.3% drop in the January-to-May period, which was better than the 3.2% decline expected by economists.
China’s retail sales fell 1.8% in June from a year earlier, compared with a 2.8% drop in May, falling short of economists’ projection for 0.3% growth.
Investment in commercial and residential real estate rose 1.9% in the first six months of the year from a year earlier, reversing a fall of 0.3% for the January-to-May period.
American Airlines Plans to Furlough Up to 25,000 Workers The airline told tens of thousands of employees that their jobs are at risk after federal aid expires Oct. 1, as air-travel demand falls again amid climbing coronavirus infections.
Professor Whose Formula Predicts Bankruptcies Has a Big Warning
(…) More than 30 American companies with liabilities exceeding $1 billion have already filed for Chapter 11 since the start of January, and that number is likely to top 60 by year-end after businesses piled on debt during the pandemic, according to Edward Altman, creator of the Z-score and professor emeritus at NYU’s Stern School of Business. Companies globally have sold a record $2.1 trillion of bonds this year, with nearly half coming from U.S. issuers, data compiled by Bloomberg show. (…)
For Altman, some of the debt sold “kicks the can down the road” for firms that don’t deserve support.
Companies are doing the opposite of what they should be doing, which is to de-leverage as the banks did after the global financial crisis of 2008, he said. “When there is an increase in insolvency risk, what you do not need is more debt. You need less debt.”
Bank of Canada Signals No Rate Hikes Until at Least 2023
OPEC and Russia-led Oil Alliance Agree to Increase Production An alliance of crude producers led by Saudi Arabia agreed to increase oil production starting in August, officials in the group said, amid signs that demand is recovering following coronavirus-related lockdowns.
Key members of the Organization of the Petroleum Exporting Countries and its Russia-led allies agreed to loosen existing production caps by about 1.6 million barrels a day, partly reversing draconian output cuts enacted to stem a sharp price decline in the early days of the coronavirus pandemic.
In April, Saudi Arabia, the world’s largest oil exporter, led a push among the 23-producer group to cut collective output by 9.7 million barrels a day, as the pandemic led to a collapse of oil demand. (…)
The group officially agreed to an overall relaxation of cuts of two million barrels a day of production, but required some countries that lagged in enforcing earlier cuts to reduce their output by a net 400,000 barrels a day. Those cuts will be required until the end of October. (…)
In its widely read monthly report Tuesday, OPEC itself said it expected that the world’s demand for oil would increase by 7 million barrels a day next year, after a forecast 8.9 million-barrel-a-day decline in 2020. (…)
WSJ/NBC NEWS POLL Biden Expands Lead as Trump’s Approval Drops
A Democratic Senate Is Looking More Likely
Trump replaces presidential campaign manager US president sidelines Brad Parscale as he trails Democrat Joe Biden in the polls