KITCO NEWS/Jim Wyckoff
Gold prices weaker, show muted reaction to dour U.S. GDP data
April 29, 2020
“Gold prices are trading modestly down in early U.S. trading Wednesday, following the release of U.S. economic data that not surprisingly showed sickly results. The gold market dipped a bit just after the release of the GDP data, but that was also the same time that news reports surfaced that a study showed positive results for the treatment of Covid-19, which in turn boosted the U.S. stock market.
It’s a big day for U.S. economic data Wednesday, starting with the advance estimate for first-quarter U.S. gross domestic product, which was just released and came in -4.8%. The number was expected to show economic growth of around -3.5% to -4.0%. Today’s number is a bad one but most agree the figure for the second quarter will be even worse. The Federal Reserve’s Open Market Committee (FOMC) concludes its two-day meeting this afternoon with a statement on U.S. monetary policy. No changes are expected but traders will parse the statement as well as Fed Chairman Jerome Powell’s virtual press conference.”
Fed to Focus on Next Steps to Save Economy: Decision Day Guide
April 29, 2020
“With interest rates near zero, Federal Reserve policy makers are likely to turn attention to other steps they could take to ensure a strong U.S. economic rebound once the coronavirus lock-down ends. The Federal Open Market Committee is all but certain to keep its benchmark overnight rate in a target range of 0-.25%, where it was lowered at an unscheduled FOMC on March 15 to help soften the pandemic’s blow. The committee will release a statement at 2 p.m.
‘Never underestimate the Fed,’ said Diane Swonk, chief economist with Grant Thornton in Chicago. ‘The Fed will affirm it is still willing to use all tools at its disposal.’ A Bloomberg survey of economists expects the central bank to keep rates near zero for three or more years. Facing an unprecedented disruption that has put 26.5 million people out of work in the last five weeks, the Fed has slashed rates and pledged up to $2.3 trillion in loans to aid businesses and state and local governments. Government data released on Wednesday showed the U.S. economy shrank at an annualized 4.8% pace in the first quarter, the steepest decline since 2008.”
US GDP shrank 4.8% in 1st quarter – biggest contraction since the financial crisis
April 29, 2020
“Gross domestic product fell 4.8% in the first quarter, according to government numbers released Wednesday that provide the first detailed glimpse into the deep damage the coronavirus wreaked on the U.S. economy. Economist surveyed by Dow Jones had expected the first estimate of GDP to show a 3.5% contraction. This marked the first negative GDP reading since the 1.1% decline in the first quarter of 2014 and the lowest level since the 8.4% plunge in Q4 of 2008 during the worst of the financial crisis.
The biggest drags on the economy were consumer spending, nonresidential fixed investment, exports and inventories. Residential fixed investment, which jumped 21%, along with spending from both the federal and state governments helped offset some of the damage. Consumer expenditures, which comprise 67% of total GDP, plunged 7.6% in the quarter as all nonessential stores were closed and the cornerstone of the U.S. economy was taken almost completely out of commission. Durable goods spending tumbled 16.1% while expenditures on services were down 10.2%. Exports dropped 8.7% while imports fell 15.3%, including a 30% drop in services. The count of all goods and services produced in the U.S. shows that even though the first quarter saw only two weeks of shutdown, the impact was pronounced and set the stage for a second-quarter picture will be the worst in the post-World War II era.”
THE WALL STREET JOURNAL/Dan Strumpf, William Boston and Talal Ansari
Earnings Reveal Coronavirus’s Hit to Big Business
April 29, 2020
“States continued to walk a tightrope on reopening guidelines as confirmed U.S. cases of the new coronavirus topped one million and new data showed widespread economic harm as countries around the world closed down to prevent the spread of the pathogen. Confirmed cases in the U.S. climbed to 1,012,583 about three months since the first reported infection appeared.
Ford Motor Co. said it lost $1.99 billion in the first quarter, and projected an even deeper pretax loss for the second quarter. The company, along with other auto makers, is expected to partially reopen production in the U.S. starting May 18. Coffee giant Starbucks Corp. said its global same-store sales fell 10% in the quarter due to the health crisis, the first time that figure has declined in nearly 11 years. Samsung Electronics Co. Ltd. warned Wednesday of more declines in the coming quarter, with demand for its smartphones, appliances and displays plummeting further as stores remain closed and consumers unlikely to spend in the economic downturn. Even companies whose businesses should be brightening reported a mixed picture. United Parcel Service Inc. reported lower shipments to big businesses and stores, and 3M Co. said sales of office supplies have plummeted, even as face-mask sales have climbed. Google parent Alphabet Inc. said revenue rose in the first quarter, but the company’s performance fell off sharply as the pandemic accelerated, and it cautioned that it couldn’t predict how the coming months would turn out.”
NPR/Scott Horsley and Avie Schneider
‘Tip of The Iceberg’: Economy Shrinks At 4.8% Pace, But Worst Is Yet to Come
April 29, 2020
“The coronavirus pandemic is likely to trigger the sharpest recession in the United States since the Great Depression. An early signal of that came Wednesday, when the Commerce Department said the economy shrank at a 4.8% annual rate in the first three months of the year — the first quarterly contraction since 2014 and the largest since the Great Recession. For the first 2 1/2 of those months, the economy was chugging along at a steady, if not spectacular pace. But the plug was suddenly pulled in mid-March — when bars, restaurants and retail shops were abruptly closed and tens of millions of Americans were ordered to stay home.
The first-quarter drop was the biggest since an 8.4% dive in the 4th qtr of 2008. It marked a reversal from the 2.1% growth rate at the end of 2019. The Commerce Department said the decline in gross domestic product was ‘in part, due to the response to the spread of COVID-19, as governments issued stay-at-home orders in March. This led to rapid changes in demand, as businesses and schools switched to remote work or canceled operations, and consumers canceled, restricted, or redirected their spending.’ Consumer spending — which accounts for about 70% of GDP — plummeted at a 7.6% rate in the first quarter — the most since 1980. More than 26 million people have filed unemployment claims. Half of all Americans say they or someone in their household has either lost hours or a job. ‘Prior to the coronavirus shock, the economy was doing relatively well,’ said Gregory Daco, of Oxford Economics. ‘The shock that we experienced in the second half of March actually has led to a sudden stop in spending on a lot of services and even spending on some goods.’ Analysts say even though that shock was more than enough to erase the gains of the previous 2 1/2 months. Daco said the first-quarter decline is ‘only the tip of the iceberg.’”
FOX NEWS/Barnini Chakraborty
China lashes out at US, claims country is ‘lying through their teeth’
April 29, 2020
“China’s foreign ministry accused the United States of ‘lying through their teeth’ and suggested the country mind its own business as the war of words between the world’s two biggest economic powers escalated. ‘We advise American politicians to reflect on their own problems and try their best to control the [coronavirus] epidemic as soon as possible instead of continuing to play tricks to deflect blame,’ spokesman Geng Shuang said. The comments came on the heels of President Trump suggesting in a press conference that the U.S. would be seeking ‘substantial’ compensation.
‘We are not happy with China,’ Trump said. ‘We are not happy with that whole situation because we believe it could have been stopped at the source. It could have been stopped quickly and it wouldn’t have spread all over the world.’ He added that the United States is considering several options to
hold them accountable.’ When asked about a recent editorial in the German newspaper Bild that printed a mockup of a $162 billion bill to China for economic damages, Trump replied, ‘Germany’s looking at things, and we’re looking at things, and we’re talking about a lot more money than Germany’s talking about.’”