The Day at a Glance | May 6 2020

FED expects uneven recovery among US regions

Members of the Open Market Committee of the US Federal Reserve, which decides on monetary policy matters, assured they expect to see an economic recovery towards the second half of 2020, however, it could occur differently among regions. The President of the Atlanta FED, Raphael Bostic, assured that there are many possible scenarios of recovery, and that controlling the virus`s spread is the fundamental part. “Across the country there has been a fair amount of diversity of experiences, diversity of vulnerability and that will translate into diversity of recoveries…” Bostic said, adding that “In many communities the ´V´ recovery is going to be very difficult to achieve”. According to the President of the Chicago FED, Charles Evans, it`s reasonable to expect a recovery in the second half of 2020, but the chances of this happening are slightly greater than more negative scenarios. Evans considers the decision to reopen the economy is one that carries high risk, and that economic recovery will be slow at first, but industries such as hospitality and traveling will not be able to resume activities immediately. The President of the St. Louis FED, James Bullard, warned that if the economy`s weakness persists in the second half of 2020, and that recovery is delayed, larger problems will be faced regarding bankruptcies and the definitive closure of businesses. Ultimately, recovery will depend on the virus`s evolution and the measures to mitigate its impact, affirmed Richard Clarida, Vice-president of the FED.

European Commission expects a deeper contraction

The European Commission published its new 2020 European Union growth estimates on Wednesday, forecasting a (-) 7.7% contraction, the greatest in the block`s history. Additionally, it expects a considerable increase in unemployment and debt in the region. The Commission is also worried about the differences between the northern and southern regions of the continent, as in the south (Greece, Italy, Spain), there is a larger exposure to a contraction in tourism, and the region`s fiscal response capacities are much lower than in the north (Germany, Netherlands); this is something that could threaten the European integration project`s continuity. The Commission called on European Union country members in order to carry out a joint response in light of the crisis. Nevertheless, no aggressive package has been defined to contravene the virus`s negative effects in Europe. Germany and the Netherlands have decisively opposed issuing bonds under the Union`s name, as they don`t agree with distributing the costs of economic aid.

Automobile sales fall 60% in Mexico in April

During the implementation of stricter measures to mitigate the virus in Mexico, car sales dropped 60.1% between March and April (64.6% annual), according to AMIA figures, which confirms the virus`s severe impacts on the automotive industry. However, it`s expected that the negative impact will extend and reach its greatest depth in June, time during which mitigation measures are still expected to continue, and consumers could suffer unemployment and lower salaries more harshly.