Newsletter: A First Quarter to Forget

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This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.

It’s another big day for economic news: A measure of Chinese factory activity is out, eurozone GDP contracted and the European Central bank meets, and U.S. consumer spending and jobless claims data are due. Jeff Sparshott here to get you through the latest.

Another Record Nobody Wanted to Break

The eurozone economy contracted at the fastest pace on record during the first three months of this year. Across the 19 countries that use the euro as their currency, gross domestic product shrank by 14.4% on an annualized basis, exceeding the 4.8% decline in the U.S. economy over the same period. That largely reflects the fact that Europe’s lockdown started earlier and has been more widespread. There were some signs that the eurozone’s northern members have suffered more modest declines in output than their southern counterparts. Austria reported a 9.6% drop, while Spain’s GDP fell by 19.2%, Paul Hannon reports.

The U.S. economy’s 4.8% contraction in the first quarter was the worst since 2008, and ended America’s longest economic expansion on record.


The European Central Bank releases a policy statement at 7:45 a.m. ET. Investors expect the ECB to scale up its giant bond-buying program, possibly as soon as today, as it seeks to help eurozone governments blunt the economic damage wrought by the coronavirus pandemic.

U.S. jobless claims are expected to show another 3.5 million Americans filed applications for unemployment benefits in the week ended April 25. (8:30 a.m. ET)

U.S. consumer spending for March is expected to fall 5% from the prior month. (8:30 a.m. ET)

The U.S. employment cost index for the first quarter is expected to rise 0.7% from the prior quarter. (8:30 a.m. ET)

The Chicago purchasing managers index for April is expected to fall to 39.0 from 47.8 a month earlier. (9:45 a.m. ET)

Japan’s consumer-price index for April is out at 7:30 p.m. ET.

Note: This is a partial list of events and subject to change.


Tip of the Iceberg

The U.S. government is likely to report that consumer spending, the economy’s key driver, fell sharply in March as many businesses closed and laid off workers. Economists surveyed by the Wall Street Journal forecast the Commerce Department will report today that household spending declined 5% last month, which would mark the steepest monthly decline in records tracing back to 1959, Sarah Chaney and Harriet Torry report.

The drop in spending occurred primarily in the second half of March, as business shutdowns and government stay-at-home orders spread. The measures have remained in places in most of the country through April, further depressing spending, incomes and broader economic growth.

U.S. jobless claims are also out this morning. States have been struggling to keep up with a tidal wave of applications for unemployment benefits. One reason: Many states’ unemployment benefit systems are hamstrung by archaic, decades-old technology, Sarah Chaney and Kate King report.

Fed to Congress: Spend More Now

Federal Reserve Chairman Jerome Powell delivered an uncharacteristically blunt call for Congress and the White House to spend more money to prevent deeper economic damage from the coronavirus pandemic, Nick Timiraos reports. Congress and President Trump have provided more than $2.6 trillion in several economic assistance measures over the last two months, and Mr. Powell lauded those efforts as appropriate. “Will there be a need to do more though? I think the answer to that will be yes,” he said. 

Ask WSJ: Join three of The Wall Street Journal’s top economics writers for a conversation on the Fed and its historic actions in the wake of the coronavirus pandemic. Begins Friday at 12 p.m. ET.

Parsing the Fed: How the April statement changed from March.

Expect Worse

How did U.S. government economists and statisticians capture the severe downturn, which really gained steam only in the final weeks of March? In the last recession, the Bureau of Economic Analysis—the agency that compiles and publishes the GDP report—had incomplete data when making its first estimates of GDP. That led to sizable downward revisions as the numbers became more complete. The government is still behind the curve, but agencies are now supplying some data faster and “big data” is rounding out the picture in other areas, the BEA’s former associate director, Brent Moulton, said in a series of tweets. One new source: daily information on credit and debit card spending. “This helped them track rapid declines in health and recreation services,” Mr. Moulton said. That’s not a guarantee of no revisions. It does suggest they won’t be as big as last time.

China’s Slow Rebound

China’s factories are resuming production, but pandemic-triggered recessions around the world have manufacturers pessimistic about export demand, figures published Thursday show. China’s official index of manufacturing purchasing managers remained positive in April, but just barely. While factories increased output, the figure was dragged down by pessimism among companies involved in exporting and importing. Smaller, export-oriented Chinese companies already see orders slackening, according to a separate, private survey. Other government figures out Thursday showed China’s domestic economy getting back on its feet as the worst of the coronavirus threat dissipates, with construction and services indicators improving from March, James T. Areddy reports.

A senior U.S. trade official expressed confidence that Beijing will meet its obligations under the trade deal with Washington. Many others question whether China, with its economy hit hard by the pandemic, is able to meet the trade deal’s mandate that it increase purchases of U.S. goods and services by $200 billion over 2017 levels, William Mauldin reports.

Are You Ready for Some Football?

Commissioner Roger Goodell told NFL employees that the league would furlough some workers and reduce salaries as the league grapples with the economic impact caused by the coronavirus. The cuts are the latest indication of the powerful financial toll that the coronavirus has taken on the sports world, Andrew Beaton reports.


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After all this, why would anyone want to live in a densely packed city? Cities make us smarter. “I show that children in rural communities do not seem to enjoy or take the same educational opportunities as children who grow up in urban communities, even conditioning on cognitive ability and household characteristics. Hence, the differences in educational attainment between urban and rural communities observed in a wide range of countries may reflect more than just the spatial sorting of households,” Uppsala University’s Raoul van Maarseveen writes in a CPB Netherlands Bureau for Economic Policy Analysis discussion paper.


Real Time Economics has launched a downloadable calendar with concise previews forecasts and analysis of major U.S. data releases. To add to your calendar please click here.


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