The big picture: the contraction in the first quarter was the second largest after German reunification in 1990.
The revised GDP data showed that the country’s economy declined slightly in the last three months of last year, which means that the largest eurozone economy is now officially in recession.
Germany joins France and Italy in recession, but nevertheless ended the first quarter in better shape than the 2nd and 3rd largest economies in the euro area. First quarter GDP decreased by 5.8% in France and 4.7% in Italy.
The difference? Germany did not introduce strict social withdrawal measures until the relatively late March 22nd date.
However, the worst is yet to come. Capital Economics’ Jack Allen-Reynolds said he expected a 10% drop in German GDP in the second quarter.
“The blockade is easing in May and June, but only gradually, and Germany’s recovery will be limited by problems elsewhere in Europe,” he said.
The reopening of the factories will not solve the economy
Remember: the Chinese economy shrank by 6.8% in the first quarter compared to a year earlier.
While the IMF still expects China’s GDP to grow 1.2% this year, analysts warn that the country’s recovery will be on the way.
The challenge: it is relatively easy for Beijing to bring in its state-supported manufacturing and construction companies. What is proving more difficult is to encourage consumers to spend.
Here is the evaluation of the economists of the Societe Generale:
“Investments outperformed consumption and, in the context of investments, properties and infrastructure outperformed thanks to the stimulus of credit. The disappointment of retail sales could continue, as the unemployment situation and the prospects for income remain difficult”, they wrote in a research note.
What it means for everyone else: China’s economic recovery has been underway for months. Even Wuhan, the epicenter of the pandemic, emerged from the blockade on April 8.
This means that countries that are still struggling to contain coronavirus still have months and months before their economies can really begin to recover. Some may even face a lost year.
The United States faces one of the most desolate prospects.
More than 36 million Americans have filed initial unemployment claims since mid-March, putting many families in severe financial stress.
And coronavirus continues to spread, with the total number of cases in the country exceeding 1.4 million. Many consumers are unwilling to leave their homes to visit restaurants and shopping malls, even if the blocks have been loosened in their state.
How bad is it? Investors will make sense when retail sales for April are released at 8:30 ET.
Another fact: JCPenney is expected to file for bankruptcy in the near future. The iconic chain would join two other major US retailers, Neiman Marcus and J.Crew, as victims of the pandemic.
Poor Americans suffer more
The Federal Reserve on Thursday reported how unevenly the coronavirus-induced economic crisis is affecting Americans.
On the one hand, low-income people are slammed. Nearly 40% of those with a family income of less than $ 40,000 reported job losses in March, according to the central bank.
At the same time, incomes and the ability to pay current bills seemed to remain generally stable for most adults during the first few weeks of the coronavirus pandemic.
Also substantially unchanged was the percentage of people who reported being able to pay an unexpected $ 400 emergency expense entirely using cash, savings or a credit card in the next bank statement.
More from CNN’s Tami Luhby: The findings support other reports showing that low-income Americans, as well as blacks and Hispanics, are bearing the brunt of the financial fallout from the outbreak.
Come on next
US retail sales data for April will be published at 8:30 am ET. JD.com entries will be posted before the opening bell.
- The Empire State Manufacturing report comes out at 8:30 ET
- University of Michigan consumer sentiment follows at 10:00 ET
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