The shakeout promises to be dizzying for the u.s. economy

La dégringolade s’annonce vertigineuse pour l’économie américaine

Angela Weiss Agence France-Presse
The shopping center Oculus of New York city, usually crowded, is deserted by the consumer.

The pandemic of sars coronavirus has inflicted on the United States, at the beginning of the year, their biggest economic contraction since the last recession. But the worst is coming and governments have to respond, said the u.s. federal Reserve (Fed).

The u.s. department of Commerce reported Wednesday a decline in the gross domestic product (GDP) during the first three months of the year, equivalent to 4.8% annualized. It was the first quarterly decline since 2014 and the most marked since the end of 2008 when the bankruptcy of the investment bank Lehman Brothers had led to the collapse of Wall Street and triggered a global recession.

There was, however, seen nothing yet, say forecasters, suggestive of an acceleration of the fall in the quarter from April to the end of June, when the pace of this decline could approach 40 %, which would be a never-before-seen since we started keeping these quarterly statistics, in 1947.

Leaded by the pandemic COVID-19, and the containment measures of governments to halt the advance, the american economy will “probably fall at an unprecedented pace in the second quarter,” said the Fed chairman Jerome Powell, during a press conference at a distance.

We already knew that the ranks of new applicants for unemployment insurance had grown to 26 million from mid-march to mid-April. It was learned on Wednesday that after a good start, the first quarter has turned to a nightmare in the second half of the month of march. At the heart of the economic activity in developed countries, household consumption has finally decreased, for example, 7.8 % in annualized terms, a level not seen since 1980. Sign of the sudden mistrust of the households, their savings rate has gone from a single shot from 7.6 % to 9.6 %, while business investment declined by 8.6 %.

La dégringolade s’annonce vertigineuse pour l’économie américaine

 

To governments to do more

Contrary to his habit, but as it has done since the beginning of the health crisis, the Fed has kept, on Wednesday, to go there of its own forecasts for the u.s. economy. “The magnitude and duration of the economic downturn are highly uncertain and depend in large part on the speed with which the virus will be brought under control,” said Jerome Powell.

The central bank has not announced no new measures of monetary stimulus, having already lowered its key interest rate in the thin range between 0 % and 0.25%, and that already the injection of liquidity into the financial markets that have led to buy to almost 2 000 billion of assets just since mid-march. However, it was willing to deploy all efforts as long as it takes to ensure a recovery, ” as robust as possible “.

Other programs of financing of companies and local governments should start soon, recalled the president of the central bank, but this was not enough. Even if the economy should begin to bounce back in the second half of the year, there is little chance that she could come back quickly to what she was still only in the month of February. To avoid the worst, the workers and companies affected by the crisis are in need of direct financial assistance and recovery policies that only governments have the power to bring them.

 

The dashboard on the evolution of the coronavirus in Quebec, in Canada and in the world

While recognizing that these have already done much, the White House and the Congress, alone, already promised 2 600 billion in aid in different forms, Jerome Powell press, however, the governments do not stop in so good way. “This is the time to use the large power budget of the United States to support the economy and try to pass through [the crisis] with the least possible damage on production capacities in the long term of the economy. “

The central banker said that he was particularly worried about the effect that could be an extension of the crisis on the workers of more modest means, who had barely begun, for a year or two, to really enjoy the longest period of uninterrupted economic growth in the country’s history, as well as the SMES that are the foundation of prosperity.

Usually extremely careful not to draw upon him the wrath of the president Trump, who has made one of his scapegoats of choice, he did not hesitate to reject the back of the hand, the hesitations that the elected officials of the right side republican are beginning to have about the impact that will have all of its aid policies on the public debt. “This is not the time, from my point of view, to let such considerations prevent us from conducting, and win the battle “, he said not without reminding us, in passing, that these same elected officials remained deaf to its own calls for the reduction of the deficits of the past few years.

Hope Scholarship

The New York stock Exchange has, nevertheless, completed the day in strong increase, the index expanded S&P 500 appreciating by 2.7 %, while encouraged, apparently, by the good results obtained during preliminary tests carried out on new treatments for patients with COVID-19. Although promising, one of these antiviral treatments, called remdesivir, is ” neither authorized nor approved anywhere in the world and has not proven its safety or its effectiveness for the treatment of the COVID-19 “, recalled Wednesday, the biotech Gilead Sciences, which is working on its development.

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