Berlingske (Denmark): the world’s largest economy in a free fall

Recent data suggest that coronaries inflicted on the US economy, the most severe in history a shot. Economic activity declined, more than ever, and unemployment reached the highest since the 1930s years. At some point there were signs that the country began to recover fairly quickly, but a new outbreak of coronavirus stopped this process. The United States have prolonged the crisis.

In the second quarter of this year, the biggest economy in the world has experienced the strongest since the end of world war II downturn. Gross domestic product (GDP) fell 9.5 percent after falling 1.3% in the first quarter. This shows how much of coronaries hurt the US economy, which is not suspended as was done in Europe, but where the services sector is even more important than us.

Americans in their economic statements, record the results in terms of annual growth, while in Europe we just take into account percentage change. Therefore, a record low figure, which appears in many titles, 32.9 % astronomy quarterly decline. But count it that way does not make sense, since we are talking about a limited event, moreover, this figure cannot be compared with European data.

The General decline in economic activity during the first six months in the US was 11%, which is comparable to 12% in Germany. Such a large reduction in the two main export markets of Denmark says something about what problems we have now to fight Danish companies.

According to Dansk Industri, the work 94 thousand Danes directly or indirectly related to exports to the US, despite the fact that in the export sector as a whole employs a little more than 800 thousand people.

Consumption suffers first

It is expected that the economic setback in the United States from reducing the consumption of citizens. Its intensity fell by 13%, which was a direct consequence introduced in April of partial or full quarantine. Many States in the South and mid-West began to open in early may, so the overall decline for the full quarter was not there anymore. Consumption goods fell by nearly three percent, which largely resulted in a significant decrease in April and subsequent growth.

Unsurprisingly, declined sharply and investment — both in business and in housing construction because many factories and construction sites closed early in the quarter. Here, too, as we already know, at some point, then there was a sharp improvement.

The biggest point of growth was government consumption and investment increased by as much as four percent. It’s more than ever during the financial crisis. The figure shows how quickly this time were involved in large aid packages. But activity in the States and in local authorities has declined, despite its record levels in many areas of the health system. In the first place is due to the fact that were closed schools and universities. Local authorities in the coming months will have to make serious financial constraints since the fall of economic activity and high unemployment has brought down tax revenues to a minimum, while costs have increased.

It all went wrong

In mid-June President Donald trump was all economic bases to win the election. Employment recovered much faster than expected, most analysts in may and June, the third was dismissed due to the quarantine went back to work. Credibility indicators rose strongly in industry and the service sector. Consumers supported a record large aid packages, so the credibility of the government was surprisingly high against the background of declining activity and rising unemployment. Disposable household income grew strongly in April and may, reaching a counterweight to recession.

But then boomerang came the consequences of irresponsible release from quarantine.

Moreover, the number of dying again now is more than a thousand people a day, so even the economy again in ruins. Large States closed bars and other entertainment places, and restaurants and many public places have imposed strict restrictions. In some States more cautious lifting of the quarantine was suspended. This is reflected in the air traffic, where the number of passengers has not changed since the time began to gain momentum infection, frozen at the level of 74% less than last year. But there are still signs of the normalization of the status of those industries that are not affected by the new restrictions. The same applies to construction.

The head of the Federal reserve system Jerome Powell (Jerome Powell) last week told a meeting on monetary policy that “economic development will depend largely on the spread of the virus”. That doesn’t sound too promising, and probably later this year, the Central Bank will take some measures. Have already been made historical in its scope the steps in trying to ensure the flow of money to small and medium businesses of the United States, while interest rates lowered to a minimum.

Negotiations between Republicans and Democrats in Washington about another aid package to any concrete result has not yet resulted. This means, in particular, that the validity of the temporary ban to put tenants on the street expired. Same with this week will affect daily subsidies, low-wage workers that many of them were more than the salary for the work. Perhaps, of course, that the government will write to the American citizens is another check that if the parties finally agree. If it really is to prevent a serious reduction in consumer confidence, will be explained later.

The US has always had a good ability to recover, but this time they may have to descend into the abyss coronavirus even lower before it gets better. The number of new applications for unemployment benefits began to grow again. So, it is likely that the situation with the unemployment will remain at the same level throughout the summer. The largest decline in the postwar period happened in 1946, when dismantled the war machine. Then, GDP fell by 11.6%. Hardly indicators this year will reach the same level, but everything points to the development of the situation in this direction.

Headwind of the economy means that President Trump is nothing to be glad about the day before the final acceleration in the presidential race. In sharp recovery and the V-shaped curve outside the White house no longer believes.