The U.S. economy contracted by the most since the great recession.
Quarterly change in real gross domestic product, seasonally adjusted at annual rates.
Quarterly change in real gross domestic product, seasonally adjusted at annual rates.
U.S. gross domestic product, the broadest measure of goods and services produced in the economy, fell at a 4.8 percent annual rate in the first quarter of the year, the Commerce Department said Wednesday. That is the first decline since 2014, and the worst quarterly contraction since the country was in a deep recession more than a decade ago.
Even so, most of the quarter came before the coronavirus pandemic forced widespread shutdowns and layoffs. Economists expect figures from the current quarter to show G.D.P. contracting at an annual rate of 30 percent or more.
“They’re going to be the worst in our lifetime,” Dan North, chief economist for the credit insurance company Euler Hermes North America.
Treasury Secretary Steven Mnuchin said this week that the economy should “really bounce back” this summer as states lift stay-home orders and trillions of dollars in federal emergency spending reaches businesses and households. Most independent economists are much less optimistic.
The estimates issued on Wednesday are preliminary and based on incomplete data, particularly for March. Some economists expect final figures, due later this spring, to show an even bigger decline.
Wall Street is set to open higher as global stocks inch up.
U.S. stock futures rose along with global stocks on Wednesday as investors awaited more indications of how well the world was recovering from the coronavirus outbreak.
Futures for the S&P 500 were up about half a percent, signaling a positive open on Wall Street after the index closed up more than 1 percent on Tuesday. European markets were mainly positive, creeping higher through the morning.
U.S. officials will unveil economic growth figures on Wednesday morning, while the Federal Reserve is set to release a statement about the health of the American economy later in the day.
Volkswagen, samsung, Airbus and other giant businesses in Asia and Europe reported grim first-quarter earnings. Major U.S. corporations — including General Electric and Facebook — are also reporting their financial results later on Wednesday.
All of that could affect investor sentiment, which has been cheered in recent days by hints that the United States and other countries will slowly try to resume business as usual.
Oil prices climbed amid continued volatility in the market. West Texas Intermediate, the U.S. benchmark, was up about 16 percent to more than $14 a barrel. Brent crude, the international benchmark, was trading at a little over $21 a barrel, up about 5 percent.
At Boeing, the news is bad: 26 percent and job cuts are coming.
Boeing reported $16.9 billion of revenue in the first quarter of the year, a 26 percent decline from last year, as the aviation industry ground to a halt during the coronavirus pandemic. The company said Wednesday it planned to cut its work force by about 10 percent, a reduction it hopes to achieve voluntarily, through buyouts and early retirement offers.
“I know this news is a blow during an already challenging time. I regret the impact this will have on many of you. I sincerely wish there were some other way,” said David L. Calhoun, Boeing’s chief executive, in a note to staff.
As of the start of the year, Boeing and its subsidiaries employed more than 143,000 employees.
With airlines delaying purchases, deliveries and maintenance, Boeing is slowing production rates, including for the troubled 737 Max jet, and is working to increase access to capital. It is planning even deeper cuts of 15 percent to the commercial airplanes and services businesses, which are most exposed to the downturn in the industry.
“The pandemic is also delivering a body blow to our business — affecting airline customer demand, production continuity and supply chain stability,” Mr. Calhoun said.
Boeing does not expect air travel to recover to pre-pandemic levels for at least two to three years and said it would likely take several years more for the long-term trend in growth to recover.
The Federal Reserve will address its efforts to reduce the pandemic’s effect.
Federal Reserve officials are wrapping up meetings on Wednesday after two months of nonstop action to avert financial calamity as the coronavirus roiled markets and upended the world economy. In the afternoon, the chair, Jerome H. Powell, is to hold a news conference to discuss the Fed’s outlook and perhaps disclose what comes next.
The Fed’s efforts to protect the economy have outstripped even its response to the 2008 financial crisis.
Officials slashed interest rates to rock bottom in a matter of weeks, not months. They have been buying bonds at a record pace, swelling their balance sheet to $6.6 trillion from less than $4.2 trillion in mid-February. And the Fed’s emergency lending authorities are reaching further this time: The central bank has said it will buy municipal debt and lend to both large and midsize companies, measures it did not take in the darkest days of the last crisis.
The monetary intervention reflects the economic shock at hand. The coronavirus outbreak gripped the world quickly and nearly completely, bringing the gears of modern capitalism — from schools and offices to amusement parks — to a standstill.
For all of the Fed’s activism, its most challenging job comes next. A first glimpse at the Fed’s playbook may come after Wednesday’s meeting. Policymakers could hint that they will leave interest rates unchanged for months or years, and some economists think they could offer guidance about their bond-buying plans.
One thing seems likely: Mr. Powell will pledge to do whatever it takes to get the country through a tight economic spot.
Airbus reports a loss of more than $500 million, citing ‘gravest crisis.’
The economic toll of the coronavirus pandemic is weighing heavily on the earnings of Airbus, the European aircraft giant, which reported Wednesday a net loss of 481 million euros (about $522 million) in the first quarter of 2020, down from a profit of 40 million euros in the same period a year ago.
The company said that it delivered 122 commercial aircraft compared with 162 in the first quarter of 2019. Around 60 aircraft were not delivered because of the pandemic. Aircraft delivery is a key threshold for earning revenues for aircraft makers.
“We are now in the midst of the gravest crisis the aerospace industry has ever known,” the company’s chief executive, Guillaume Faury, said in a statement. “We’re implementing a number of measures to ensure the future of Airbus.”
Recently, Mr. Faury sent a memo to employees warning that Airbus, with a work force of 134,000, was “bleeding cash at an unprecedented speed.”
Overall revenues at the company declined by 15 percent to 10.6 billion euros for the quarter. Defense revenues rose by 16 percent to 1.9 billion euros, partly offsetting the drop in commercial aircraft sales.
German carmakers report plunging sales and profit.
Volkswagen, the world’s largest carmaker, said that vehicle sales fell 25 percent in the first three months of the year, a vivid indication of the havoc that the coronavirus is causing throughout the auto industry.
The company, based in Wolfsburg, Germany, said that it sold 1.9 million vehicles in the first quarter compared with 2.6 million in the first quarter of 2019. Profit also collapsed, falling more than 80 percent to 517 million euros, or $562 million.
As Volkswagen and other carmakers issue quarterly earnings reports, the scale of the damage from factory shutdowns and dealer closings is becoming clear. Daimler, the maker of Mercedes-Benz cars, said that net profit fell more than 90 percent, to 168 million euros, compared to a year earlier.
A recovery is unlikely to come soon. Volkswagen, which began limited production at its main factory in Wolfsburg on Monday, said in a statement that profit for 2020 would be “severely below” that of 2019, but that it expected to avoid falling into the red
samsung says demand for its smartphones is weak.
samsung said on Wednesday that it expected to see a substantial drop in earnings during the second quarter as the coronavirus pandemic hurts demand for its smartphones and televisions.
Sales of personal computers and servers have increased as many white-collar workers try to avoid exposure to the virus by working remotely. But the pandemic has slowed demand for smartphones and disrupted the production and logistics networks that manufacturers like samsung rely on.
Revenue and profit from the sale of smartphones, televisions and other devices “are expected to decline significantly as Covid-19 affects demand and leads to store and plant closures globally,” the South Korean electronics giant said in a statement accompanying its quarterly earnings announcement.
The company is in a better position than it was at this time last year, when a glut of chips suppressed global demand. Its year-on-year operating profit is up 3 percent to 6.4 trillion won ($5.3 billion) compared with the same period of 2019.
Still, its operating profit in the first three months of the year was down nearly 10 percent compared with the previous quarter.
Cash giveaways are multiplying on Instagram. They aren’t charity.
The giveaways are often framed as charity, but they’re part of a growth scheme that allows big influencers — whose brand deals and sponsored trips are on hold — to make quick money from home. Purchasing sponsor slots for the events has also become the fastest and cheapest way to grow on the platform.
“corona has been tough on influencers and if you get told you can make $20,000 for posting a giveaway on Instagram you’re probably going to do it,” said Nathan Johnson, 19, who helps YouTube and TikTok stars orchestrate giveaways.
Instagram giveaways first emerged around 2016, and at one point focused on gifting things like Louis Vuitton bags. But in the era of the coronavirus, influencers are mostly just offering cash.
“People really need cash more than they do handbags, and logistically it’s harder to take a promotional pic with the celebrity and the bag when everyone is in lockdown,” said Louisa Warwick, the founder of Social Acceleration Group, which has orchestrated seven Instagram giveaways with influencers and actresses.
China’s factories are back. Its consumers aren’t.
As the coronavirus outbreak ebbs in China, the country’s companies and officials have made big strides in restarting its economy. Its factories, brought to a standstill when the coronavirus outbreak swept through the country in January, are humming again, and even the air pollution is coming back.
But empowering consumers could be the tougher task. Many lost their jobs or had their pay slashed. Still others were shaken by weeks of idleness and home confinement, a time when many had to depend on their savings to eat. For a generation of young Chinese people known for their American-style shopping sprees, saving and thrift hold a sudden new appeal.
China’s consumer confidence problem offers potential lessons for the United States and Europe, which are only beginning to plan their recoveries. Even if companies reopen, the real challenge may lie in enabling or persuading stricken and traumatized consumers to start spending money again.
A number of economists have called on China to do more to help consumers. The United States and other countries have unleashed major spending programs that include direct payments to households, but China has largely refrained so far, in part because of debt concerns.
Catch up: Here’s what else is happening.
The ratings agency Fitch downgraded Italy’s government debt to the brink of junk status, leaving Rome little room for error as it borrows heavily to counter the effects of the coronavirus pandemic. Fitch predicted that Italy’s debt would equal 156 percent of gross domestic product by the end of 2020, an astronomical level that will make it harder for the government to sell bonds at affordable interest rates.
Ford Motor said on Tuesday that it lost $2 billion in the first quarter as factory and dealership shutdowns cut into auto production and sales for much of March. The automaker also said it expected to lose more than $5 billion on an adjusted, pretax basis in the second quarter, when the damage from the coronavirus is expected to be significantly greater
Reporting was contributed by Taylor Lorenz, Ben Casselman, Stanley Reed, Ben Dooley, Keith Bradsher, Jeanna Smialek, Kate Conger, Mike Isaac, Neal E. Boudette, Michael Corkery, Sapna Maheshwari, Gregory Schmidt, Carlos Tejada, Mike Ives and Kevin Granville.