This is the web version of the WSJ’s newsletter on the economy. You can sign up for daily delivery here.
When a Good Economy Turns Sour
A lot of recent economic data for the U.S. suggest the economy was slowly picking itself up last month. Then came the rise in coronavirus cases in Texas, Florida, Arizona, California and elsewhere, which could freeze the progress made so far.
Retail sales for June due to be released at 8:30 a.m. ET are expected to show another strong pickup, following May’s record 18% gain, reports Harriet Torry. A Wall Street Journal survey of economists expects a 5.2% rise. We’re also expected to see the latest weekly data on jobless claims, which have been inching down.
Thursday’s data comes on the heels of manufacturing data released Wednesday, which showed American factories were slowly starting to hum again last month. The Federal Reserve’s industrial production index increased 5.4% in June, following a 1.4% rise in May. That’s not enough to undo the effect of a record 12.7% decline in April, but it’s a start.
The question now is what happens to July data, which will reflect the response to the new outbreaks. States and local governments have been imposing or reimposing restrictions to try to tamp down the new infections. That will have some economic impact although it’s not clear how much.
A compilation of business anecdotes published by the Fed and known as the “beige book” suggests we should be cautious about the near future. Some businesses said they remained worried that the epidemic would hold back the recovery. And many said it was difficult to hire workers back given continuing health and safety concerns.
“I don’t see retail sales after this month being that great,” said Joel Naroff, chief economist at Naroff Economic Advisors. New restrictions on bars and restaurants mean they “don’t have the capacity to grow,” he added.
Unless health authorities can get the spread of the virus under control, the recent patch of hopeful data could end up being short-lived.
What to Watch Today
U.S. retail sales and weekly jobless claims numbers are released at 8:30 a.m. ET. Sales are expected to show a 5.2% increase and initial claims are forecast at 1.25 million.
New York Fed President John Williams speaks at 11:10 a.m. ET.
Atlanta Fed President Raphael Bostic speaks at 2 p.m. ET.
Small Business Struggles
When it looked as though California had gotten its coronavirus cases under control, small businesses and restaurants throughout the state took steps toward reopening. Now, the state is in lockdown again and some of those efforts have been wasted. What’s harder is that this time they’ve already spent their small business federal loans, writes Anne Steele.
Millions of Americans left unable to make rent payments due to the coronavirus could be at risk of eviction in the months ahead unless government measures to protect them are extended, economists and housing experts say. According to weekly Census Bureau data, around 12 million adults live in households that missed their last rent payment, and 23 million have little or no confidence in their ability to make the next one.
Back to Work
Some workers say they’re feeling pressure from their employers to go back to the office even as coronavirus cases surge, report Collin Eaton and Konrad Putzier. In Texas, which has become a new hot spot for infections, oil refiner Phillips 66 recalled the majority of its employees to its main Houston office in June. Employees there have complained about lax safety protocols and an onerous approval process to work from home.
Copper Shows The Way
Copper prices are surging, a sign that investors are optimistic about a global economic rebound despite a sharp uptick in coronavirus cases in the U.S., Amrith Ramkumar reports. Copper futures prices climbed to their highest level since April 2019 on Monday, before slipping slightly. Copper is widely used in manufacturing, which means a rebound in copper futures represents a bullish bet for the world economy and for China in particular, which consumes roughly half the world’s copper.
Slow Recovery in Canada
The Bank of Canada isn’t expecting a quick economic bounceback, Kim Mackrael reports. The central bank left its key rate unchanged at 0.25% and signaled it probably wouldn’t raise it for at least two years. It estimates gross domestic product fell an annualized 43% in the second quarter from the first.
Chipotle Mexican Grill Inc. says it plans to add up to 10,000 employees as it opens more stores with drive-through lanes. Life under coronavirus has prompted the company to adjust its growth strategy and it now expects more than 60% of the new stores it opens will have drive-through lanes, up from 40% of the stores opened last year. The company opened its first drive-through two years ago, reports Micah Maidenberg.
Philadelphia Fed President Patrick Harker said he expects the economic recovery to be slow and uncertain, especially as new coronavirus cases surge. That rules out the U-shaped or the V-shaped recovery that many had been hoping for, he said. “If you think of a letter, it’s definitely not a U, it’s probably closer to a swoosh, written with a very shaky hand,” he told Michael S. Derby.
What Else We’re Reading
A new paper by San Francisco Fed economists serves as a reminder not to put too much stock in early gross domestic product releases. The first GDP estimate in the U.S. relies on incomplete reports and uses statistical methods to fill in missing information, they write. That “fog of numbers” grows even foggier in times of economic turbulence. For instance, write Òscar Jordà, Noah Kouchekinia, Colton Merrill, and Tatevik Sekhposyan, the government initially estimated an annualized decline of 3.8% in GDP in the fourth quarter of 2008, at the height of the last recession. That estimate was later revised down to an 8.4% decline.
SIGN UP FOR OUR CALENDAR
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.