What economic lessons will the world learn from Covid-19?
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London (CNN Business)The global economy is facing its worst contraction since the Great Depression. But early economic data indicates that the slump, while historically severe, has eased this month following a brutal April.
What’s happening: The downturn in Europe continued in May, according to a closely-watched gauge of economic health. But the rate of decline slackened as some parts of the economy were allowed to reopen.
The initial reading of the composite purchasing managers’ index published by IHS Markit for the euro zone on Thursday was 30.5 — up from an all-time low of 13.6 in April. A reading below 50 indicates a drop in output from the manufacturing and services sectors.
“The eurozone saw a further collapse of business activity in May but the survey data at least brought reassuring signs that the downturn likely bottomed out in April,” said Chris Williamson, chief business economist at IHS Markit.
In Japan, composite PMI rose slightly from 25.8 in April to 27.4 in May. Data for the United States is due later Thursday.
The path forward for the economy still looks treacherous, with social distancing measures expected to be kept in place for some time.
“As long as the epidemic continues in the United States, and indeed continues significantly in many parts of the world, we can’t really have an economic recovery,” economist Jeffrey Sachs told CNN Business’ Alison Kosik on Wednesday. “We may have blips, we may have moments of optimism — but we’ll have lots of moments of despair as well.”
The evidence: Ford has been forced to halt production at two US plants this week because employees tested positive for Covid-19. The factories in Chicago and Dearborn, Michigan had just restarted production on Monday after suspending operations for roughly two months.
The PMI data failed to lift stocks on Thursday as investors showed fresh concern about the deteriorating relationship between the United States and China. President Donald Trump tweeted late Wednesday that Beijing “could have easily stopped the plague, but they didn’t!” He criticized “disinformation and propaganda” to deflect blame, which he said “comes from the top.”
The remarks come as China’s biggest political gathering of the year kicks off Thursday. Investors are watching to see if China announces new stimulus measures to create jobs for the tens of millions of people left unemployed by virus shutdowns.
Everyone you know uses Zoom. That wasn’t the plan
The tweet was when Eric Yuan knew something had to change.
Boris Johnson, the UK prime minister, shared a photo from his first ever virtual cabinet meeting. The cybersecurity red flags jumped out immediately.
Some cabinet secretaries’ Zoom screen names were visible, you could see which platform the cabinet was running its computers on, and most glaringly, the meeting ID was visible for all to see. The significance of the moment was not lost on the team at Zoom.
“This was our wake-up call,” Yuan, the 50-year-old founder and CEO of Zoom, told my CNN Business colleague Jon Sarlin over a Zoom interview from his San Jose home.
Zoom grew into a vastly profitable company selling software to businesses that could enable a venture capital firm to seamlessly take virtual pitch meetings from around the globe or an executive to deliver an all-hands to a remote workforce. Powering British Cabinet meetings was never on the radar.
Yuan blames himself for not anticipating that users might want to share a screenshot of a meeting. For his business clients, sharing a screenshot of your board meeting would be unthinkable. But business clients weren’t his only worry anymore.
The pandemic has transformed Zoom into an essential tool for schools, church groups, weddings and government ministers. Now Yuan is trying to figure out how to make Zoom something it was never meant to be.
“Zoom is not only a business communication company — suddenly, it’s becoming an infrastructure company,” Yuan said.
Trump could lose election in a landslide, new model predicts
The economy has gone from President Donald Trump’s greatest political asset to perhaps his biggest weakness.
The coronavirus recession will cause Trump to suffer a “historic defeat” in November, a national election model released Wednesday by Oxford Economics predicted.
The details: The model, which uses unemployment, disposable income and inflation to forecast election results, predicts that Trump will lose in a landslide, capturing just 35% of the popular vote, my CNN Business colleague Matt Egan reports.
That’s a sharp reversal from the model’s pre-crisis prediction that Trump would win about 55% of the vote. And it would be the worst performance for an incumbent in a century.
“It would take nothing short of an economic miracle for pocketbooks to favor Trump,” Oxford Economics wrote in the report, adding that the economy will be a “nearly insurmountable obstacle for Trump come November.”
Why it matters: The model has correctly predicted the popular vote in every election since 1948 other than 1968 and 1976 (although two candidates lost the popular vote but won the presidency during that period, including Trump in 2016).
The latest data on US initial and continuing unemployment claims arrives at 8:30 a.m. ET.
- TJX (TJX) and Best Buy (BBY) report earnings before US markets open. Lions Gate Entertainment (LGFA) and Nvidia (NVDA) follow after the close.
- The flash reading of the composite purchasing managers’ index in the United States posts at 9:45 a.m. ET.
Coming tomorrow: Alibaba (BABA) reports earnings.
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