Historical contraction is expected in the United States
According to the most recent estimates, the US economy could contract between 5% (annualized) and 9% during 2Q20, surpassing its worst contraction recorded during the global financial crisis a decade ago. The most negative scenarios forecast contractions of up to 14%, with the possibility of seeing the unemployment rate go up to 7.5%. The negative impact will greatly depend on the severity of measures carried out to contain COVID-19`s spread. The effectiveness of fiscal measures will also be important, as they could help see a lesser contraction and a faster recovery. At the moment, the United States Senate will continue discussing a fiscal package of up to $1 billion dollars today, which was proposed by Republicans yesterday. The package proposes making direct deposits to US citizens of up to $1,200 dollars, loaning small businesses and industries hundreds of millions of dollars, and postponing the payment of taxes. According to republican leader Mitch McConnell, voting on these measures could take a few more days. The economic impacts of the virus can already be seen: Initial jobless claims increased last week to their highest level in two years (from 70 thousand to 281 thousand). In California, an order has been issued, which requires people to stay at home in fears of the virus spreading to up to 25.5 million people if immediate actions aren`t carried out. Similar steps are expected to be taken in the rest of the country in the following days.
Texas suggests carrying out oil production cuts
Oil prices recovered drops seen on Monday almost in their entirety yesterday and the WTI stays close to $25 after President Donald Trump implied he could intervene in the price war that has led energy prices to collapse. Moreover, it`s been reported that the main industry regulator in Texas considers possible production cuts for the first time in 50 years. Ryan Sitton, one of the three members that have voting power in the Texas Railroad Comission, proposed Texas could join Russia and Saudi Arabia in reducing production in a newspaper article, and requested support from the federal government to negotiate with these countries. According to Sitton, the US government could intervene and stop the collapse of the oil industry.