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The eurozone economy shrank at the fastest pace on record during the second quarter, as lockdowns imposed to limit the coronavirus brought much business activity to a standstill. Across the 19 countries that use the euro as their currency, gross domestic product fell by 12.1% from the prior quarter. “This figure confirms the enormous economic damage caused by coronavirus-induced lockdowns, which have left the bloc’s economy around 15% smaller compared to the end of 2019,” said Oxford Economics economist Rosie Colthorpe. “The recovery is set to be gradual and uneven, meaning we expect eurozone GDP to only regain its Q4 2019 level by mid-2022.”
Using the same measure, U.S. gross domestic product fell by 9.5% in the second quarter—a post-World War II record.
WHAT TO WATCH TODAY
U.S. consumer spending for June is expected to rise 5% from a month earlier. (8:30 a.m. ET)
The U.S. employment-cost index for the second quarter is expected to rise 0.6% from the prior quarter. (8:30 a.m. ET)
The Chicago purchasing managers index for July is expected to rise to 43.5 from 36.6 a month earlier. (9:45 a.m. ET)
The University of Michigan consumer sentiment index for July is expected to fall to 72.7 from a preliminary reading of 73.2. (10 a.m. ET)
The Baker Hughes rig count is out at 1 p.m. ET.
U.S consumer spending likely rose in June but appears to have weakened in recent weeks as coronavirus cases spiked, restraining the economic recovery. Americans’ ability and willingness to spend will largely determine the economy’s path in coming weeks and months. The Commerce Department will post official data on June household income and spending at 8:30 a.m. ET. Household spending reflects two-thirds of economic demand in the U.S. A sharp drop in spending—tied to business closures and fears of the virus—was the biggest reason the U.S. economy contracted at a record rate in the second quarter, Josh Mitchell and Te-Ping Chen report.
Evidence the recovery has weakened in recent weeks: The number of workers applying for initial unemployment benefits rose for the second straight week—by a seasonally adjusted 12,000 to 1.43 million in the week ended July 25—after nearly four months of decreases following a late-March peak. The number of people receiving unemployment benefits increased by 867,000 to 17 million in the week ended July 18, ending a downward trend that started in mid-May.
A big potential blow to consumers: The Federal Pandemic Unemployment Compensation program provides an additional $600 per week to individuals who are collecting unemployment compensation—including through regular state programs, existing federal programs and newly created pandemic-specific unemployment programs. That expires today. Congressional leaders and White House officials, meanwhile, failed to strike a deal on coronavirus relief Thursday night. Both sides said they expected to continue the negotiations Friday, Kristina Peterson and Siobhan Hughes report.
Employers across the country are being sued by the families of workers who contend their loved ones contracted lethal cases of Covid-19 on the job, a new legal front that shows the risks of reopening workplaces. Walmart, Safeway, Tyson Foods and some health-care facilities have been sued for gross negligence or wrongful death since the coronavirus pandemic began unfolding in March. The cases are part of an unfolding liability threat facing U.S. companies of all industries as many resume operations after having employees work remotely or being shut down altogether for months, Janet Adamy reports.
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An official gauge of China’s factory activity expanded at a faster pace in July, keeping the recovery of the world’s second-largest economy on track. China’s official manufacturing purchasing managers index picked up slightly from June and remained in expansionary territory for the fifth consecutive month. China’s official nonmanufacturing purchasing managers index remained in positive territory thanks to robust activity in the property and investment sectors, which fueled construction. Even so, the overall nonmanufacturing index decelerated slightly from a month earlier. Taken together, the data suggests that consumer demand continues to lag behind the recovery in China’s industrial capacity, a potential headwind to future growth, Jonathan Cheng reports.
Amazon, Apple and Facebook reported thriving business during the throes of the coronavirus pandemic, highlighting the tech industry’s central place in business and society at a time of growing concern over its clout. The companies showed strength in businesses ranging from gadgets and online retail to cloud computing and digital advertising. Google parent Alphabet was the outlier Thursday, reporting a year-over-yer decline in quarterly revenue for the first time in company history, Sebastian Herrera reports.
The extraordinary display of business resilience amid the sharpest economic contraction in history put a spotlight on Big Tech’s unstinting rise only a day after the chief executives of the same four companies were grilled by members of the House Judiciary Committee investigating antitrust concerns. Lawmakers’ questions reflected bipartisan disquiet with the leverage those companies have gained over a range of business and social activity.
WHAT ELSE WE’RE READING
The U.S. economy is struggling to keep up with the rise in coronavirus cases—and that’s infecting the labor market. “The economic slowdown will likely continue if the outlook for fully reopening the economy appears gloomy. Demand for workers is a function of current business needs as well as anticipated future needs. If companies and business owners fail to see the light at the end of the tunnel, the labor market will likely suffer,” Conference Board economists Agron Nicaj and Gad Levanon write in a new blog post.
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