The outbreak of the coronavirus has dealt a shock to the global economy with unprecedented speed as it continues to spread across the world. Here is a look at some of the latest developments Friday related to the global economy, particular economic sectors and the workplace:
American Airlines CEO Doug Parker says the company is eligible for about $12 billion of the $50 billion in grants and loans set aside for passenger airlines under the economic-rescue bill. In a video to employees, Parker said some of the terms of the grants aren’t yet clear, “so we are not yet positive that American will meet those conditions,” including that airlines not furlough or lay off workers until Sept. 30.
Parker said schedule cuts due to light travel demand will mean “many groups of employees” will work a minimum number of hours “for the next few months.” It was not clear, however, whether the reduction in hours was the potential hurdle to American getting grant money. American plans to operate at about 40% of capacity in April and only 20% in May because of the steep fall in travel. Parker said current flights are on average less than 15% full.
Southwest Airlines CEO Gary Kelly says the company is losing big money on every single flight as travel demand slumps amid the virus outbreak. Kelly said in a company video that the grants set aside for airlines under the economic rescue bill make the company more confident it can avoid layoffs. Southwest says it has never furloughed anyone in its history.
The rescue bill may also be helping to provide some stabilization to the industry as the S&P 500 transportation sector looks to have its first positive week since the middle of February.
Fitch is affirming the United States’ sovereign rating at “AAA” but cautions there are risks to it amid the pandemic.
Fitch said high fiscal deficits and debt – which were already rising before the economic shock precipitated by the coronavirus – are starting to erode U.S. credit strengths that include the dollar and financing flexibility. The agency added that the risk of a near-term negative rating action has climbed given the magnitude of the shock to the economy and public finances from the virus and the fiscal policy response, particularly in the absence of a credible consolidation plan for the country’s preexisting, longer-term public finance and government debt challenges.
Moody’s says Italy’s restrictions will depress its economy, outweighing simultaneous government support measures. The agency says the country’s weaker economy will weigh on its banks. Demand for a range of fee-generating banking services is expected to fall and problem loans are anticipated to rise.
Closures are also expected to pressure revenue for regions in Russia. But Moody’s says most regions it rates can maintain an adequate operating performance this year even with declines of up to 50% in corporate income tax revenue from the sectors most affected by the outbreak. Most regions are also anticipated to be able to withstand a combined 50% decline in corporate income tax and small business tax, as well as a 30% decline in personal income tax and still have a positive operating balance.
Party City is extending closures of corporate owned retail stores in the U.S. due to the pandemic. Stores will remain closed until it is practical to reopen. Curbside pickup of online orders is being expanded to additional markets. Party City also is drawing down an additional $150 million from its $640 million senior secured asset-based revolving credit facility. The company currently has no immediate use for the funds and made the withdrawal out of an abundance of caution. It’s also withdrawing its fiscal 2020 financial outlook.
Conagra Brands is giving bonuses to employees at production and distribution facilities in the U.S., Canada and Mexico. Full-time employees in the U.S. will receive $500 and part-time employees will receive $250, with similar amounts provided to workers in Canada and Mexico. The company is also continuing to pay anyone that is away from work due to a COVID-19-related illness. Those employees also will be eligible to receive the bonus.
While oil prices have started to stabilize, they still are well below normal levels. Benchmark U.S. oil was steady Friday, dropping 12 cents to $22.48 per barrel in electronic trading on the New York Mercantile Exchange. It slid 7.7% on Thursday to settle at $22.60 a barrel. Goldman Sachs has forecast that it will fall well below $20 a barrel in the next two months because storage will be filled to the brim and wells will have to be shut in.
Nearly half of U.S. consumers are extremely concerned about the virus outbreak, according to CoreSight Research’s latest survey. That’s up 10 percentage points from a week earlier. About 9.1% of people have lost their jobs, up from 4.2%. And 95% of respondents are avoiding public areas and travel, up from approximately 85% a week ago. Shopping centers and malls are the third most avoided location, following restaurants/bars/coffee shops and movie theaters, respectively.
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