The Economist - USA (2020-05-16)

6 The EconomistMay 16th 2020
The world this week Business

SaudiArabiasaidit wouldcut

oilproductionbyanother1m

barrelsa dayfromnextmonth,

furtheringitsefforttoshoreup

oilprices.Kuwaitandthe

UnitedArabEmiratesswiftly

followedwiththeirownreduc-

tions.opec’s dealwithRussia

lastmonth,whichendedtheir

abruptpricewarandmade

recordcutstooutput,hasdone

littletoincreaseprices.Brent

crudeistradingataround$30a

barrel,halfitslevelin

mid-February.

SaudiAramcoreportedthatits

netprofithadfallenby25%,

yearonyear,inthefirstquar-

ter,to$16.7bn.Thestate-

controlledoilcompanywill

stillpaya shareholderdivi-

dend,mostofwhichgoesto

theSaudigovernment.Withoil

revenuesinking,thegovern-

mentislookingatotherways

toraisemoney,andhastripled

thekingdom’svalue-addedtax

rateto15%.

Back to Cannery Row

America officially lost 20.5m

jobsin April. The number for

just one month dwarfs the

8.6m jobs that were lost over

the whole of 2008 and 2009

during the financial crisis. The

unemployment rate has soared

to 14.7%, the highest since the

second world war. Steven

Mnuchin, the treasury

secretary, conceded that it

could hit 25% in the coming

months, a level last seen

during the Depression.

Stockmarkets took fright after

Jerome Powell, the chairman of

the Federal Reserve, warned

that more stimulusfrom

Congress will be required. The

Democrats have proposed an

extra $3trn in spending,

though their plan is not

supported by Republicans.

Despite avoiding a prolonged

lockdown, the South Korean

economy shed almost half a

million jobs in April, the most

since 1999 at the tail end of the

Asian financial crisis. The

pandemic has created a “war-

time situation” in the econ-

omy, said the country’s presi-

dent, Moon Jae-in.

Britain’seconomywas2%

smaller in the first quarter than

in the previous three months,

the fastest rate of contraction

since the global financial crisis

of 2007-09. However, the

figure only captured a glimpse

of the chaos caused by

covid-19. Britain’s lockdown

began in late March; the econ-

omy was 5.8% smaller in that

month than it was in February.

Forecasters think the economy

could shrink by 20-30% in the

second quarter. A study by

academics at the London Busi-

ness School found that house-

hold spending has plunged by

40-50% during the crisis.

The British government

extended its pay-protection

planuntil October, through

which furloughed workers

receive 80% of their wages

subject to a salary cap. But the

government said that in the

summer it would ask compa-

nies to start sharing the

scheme’s cost in order to ease

the strain on public finances.

Kristalina Georgieva, the head

of the imf, warned that the

outlook for the global

economyhad worsened since

the fund published a gloomy

scenario just last month.

pncFinancial, America’s

ninth-largest bank, announced

the sale of its 22% stake in

BlackRock. The stake is worth

around $17bn. pncwas Black-

Rock’s biggest shareholder, but

as a regional bank it is poten-

tially exposed to souring loans

in the energy and hospitality

industries during the pandem-

ic. Selling its holding bolsters

its capital defences.

Turkey’sfinancial regulator

lifted a brief ban on bnp

Paribas, Citigroup and ubs

from trading in its currency

market. According to the

regulator the banks were

barred because they had not

settled with their Turkish

counterparts. But the ban

coincided with the lira falling

to another record low, suggest-

ing that the government was

trying to prop it up.

Vehicle salesin China rose by

4.4% last month compared

with April 2019, according to

the China Association of Auto-

mobile Manufacturers. It is the

first increase since mid-

(when a tax break on car pur-

chases ended) and was driven

by a surge in sales of commer-

cial vehicles. Sales of pas-

senger cars remain subdued.

Toyotasaid it expects operat-

ing profit for the current

financial year to fall by 80%.

The world’s second-biggest

carmaker thinks its sales will

drop to a nine-year low.

While industries in the physi-

cal world bear the brunt of

locked-down economies, those

in the virtual realm continue to

thrive. Tencent, one of the

world’s biggest tech conglom-

erates, reported a 26% rise,

year on year, in quarterly sales,

as the number of subscribers to

its video service surged to 112m

and that for its music service to

43m. It made a profit of 28.9bn

yuan ($4.1bn) in the quarter.

Getting greedy?

Uber was reportedly in talks to

merge Uber Eats, its food-

delivery service, with

Grubhub, a rival in that

market. The combined oper-

ations would take a 55% slice of

the food-delivery industry in

America. That might be too

much to swallow for

trustbusters in Washington.

Britain

GDP, % change on previous quarter

Source:ONS

1

0

• 
  


• 
  


• 
  

  1311092007 201715