Virus puts brakes on US economic engine: consumer spending

Business

Plastic gloves lays on the ground in Paris, Friday, April 10, 2020, during a nationwide confinement to counter the new coronavirus. For most people, the new coronavirus causes only mild or moderate symptoms, such as fever and cough. For some, especially older adults and people with existing health problems, it can cause more severe illness, including pneumonia. (AP Photo/Michel Euler)

The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed. Following are developments Friday related to the global economy, the work place and the spread of the virus.

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CONSUMER DURESS: The consumer drives about 70% of all economic activity in the U.S., and that engine is sputtering. with millions of people shut in their homes.

— The company that runs Coach, Kate Spade and Stuart Weitzman stores extended the closure of all locations in North America and Europe by two weeks, to April 24. Tapestry on Friday suspended share buybacks and CEO Christopher Rondeau voluntarily gave up his base salary.

— Citi expects that the chill in consumer spending will forestall the Fed’s 2% target inflation rate “for some time.”

— Gas prices are falling because commuters, vacationers and road trippers are doing none of those things. Advanced Auto Parts pulled its financial forecast for the year, saying it is no longer reliable.

NOT HEALTHY: Hospitals are the front line in the fight against the pandemic, and the economic cost for the health sector is mounting.

— The federal Health and Human Services department says it’s releasing the first $30 billion in grants provided by the stimulus bill to help keep the U.S. health care system operating during the coronavirus outbreak. Congress provided $100 billion for the health care system in the $2 trillion stimulus bill.

Hospitals and medical practices are facing a cash crunch because of the mass cancellation of elective procedures to prepare for rising numbers of coronavirus patients, many of whom require specialized treatment.

LETTING OURSELVES GO: The phrase “the COVID-15” is gallows humor for potentially universal weight gain with so many people holed up in their homes. Gyms are closed, bicycle trails are cordoned off, and even walking outside can be risky. And makeup? Why bother.

— The credit ratings agency Moody’s downgraded Coty and pH Beauty, both cosmetics companies, on Friday. People are not going to work, to bars, and when they travel outdoors, it is often with a covered face. None of that bodes well for makeup or skin products.

— Planet Fitness, which operates about 2,000 gyms, furloughed all employees at the locations it directly controls. Store managers will be kept on to oversee the properties.

TECH ASSIST: The largest U.S. tech companies, as well as startups, are assisting in the fight against the coronavirus.

— New York has partnered with Google, Deloitte, and Verizon to improve the reliability of the state’s online and telephone-based unemployment insurance application systems. There have been 350,000 claims in the last week. So far, 600,000 claims over the past three weeks have been successfully processed and over 200,000 are still in partial status.

Google helped New York design a revamped website and hopes the technology can be used by other overwhelmed states as well.

HEAVY INDUSTRY: Global manufacturing is at a standstill because social distancing has shut down factories.

— President Donald Trump is adding to the growing expectation that Boeing will go after a slice of the coronavirus-relief measure.

“The aid hasn’t been given yet, but they will be asking in my opinion. Boeing has not asked for aid yet, but I think they probably will,” Trump said at a White House briefing.

The $2.2 trillion relief measure includes $17 billion for companies deemed important to national security. A Boeing spokesman said the company was waiting to see Treasury Department guidelines before deciding whether to apply for aid.

— Toyota Chief Executive Akio Toyoda promised on Friday that the Japanese auto industry will protect jobs. Toyoda, speaking as head of the Japan Automobile Manufacturers Association, said that the group that brings together Japanese automakers including Nissan Motor Co. and Honda Motor Co., as well as parts makers, will set up a special fund to help people who have lost jobs find employment.

TAKING VOLUNTEERS: More than one-third of Delta Air Lines’ employees have volunteered to take unpaid leave to help the airline cope with a sharp drop in travel during the coronavirus pandemic.

CEO Ed Bastian said in a memo to Delta’s 91,000 employees that nearly 35,000 have agreed to take leave — and he appealed for more.

GOVERNMENTS AND CENTRAL BANKS: The U.S. this week announced another $2.3 trillion in funding to goose the economy, and other central banks are taking similar measures to keep national economies from sliding into deep recession.

— The Sri Lankan government has declared the producing of rice an essential service in a bid to ensure food security. Rice and curry is a staple meal in almost every household. There is a nationwide curfew and the government is delivering food to people’s homes, but people have had difficulty finding rice on their own and prices are spiking.

— Spain’s economy minister Nadia Calviño said in an interview with Cadena SER radio that he wants Europe to launch “coronabonds,” shared debt backed by all 19 member countries that would be borrowed by the hardest-hit member nations at low interest rates. The Eurogroup’s agreement late on Thursday allows countries to borrow up to 2% of GDP from the bailout fund set up during the debt crisis a decade ago.

MARKETS:

— Asian shares were steadyin quiet Good Friday trading after Wall Street closed out its best week in 45 years thanks to the Federal Reserve’s titanic effort to support the economy through the coronavirus crisis. Many world markets were closed for Easter weekend holidays.

Copyright 2020 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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