Here’s what you need to know: Spending during the pandemic has been bifurcated, with Americans spending more on essentials like gr...
Consumer spending increased for a fifth straight month in September, though the recovery in the battered retail sector remains halting as Americans continued to struggle with high unemployment and waning confidence in the economy.
Retail sales rose 1.9 percent, the Commerce Department said on Friday.
Much of the spending last month, economists say, was likely driven by white-collar workers whose economic fortunes have remained relatively stable during the coronavirus pandemic, while consumers at the lower end struggled with high unemployment of 7.9 percent.
“We are still at one of the highest unemployment rates of any recession since 1948,” said Beth Ann Bovino, chief U.S. economist at S&P Global. “I don’t think we can celebrate.”
The early weeks of the pandemic were disastrous for retail sales, which dropped 8.3 percent in March and then fell 16.4 percent in April. Sales bounced back strongly in May and June, when stores reopened from lockdowns, but growth has since slowed. Sales rose 0.6 percent in August, after a 0.9 percent gain in July.
Weighing on consumer spending has been the failure of Congress and the Trump administration to extend additional financial assistance to jobless Americans, after the weekly $600 subsidy ended in July.
Even though stimulus money has dried up, consumers have benefited from a $13.6 trillion savings buffer that accumulated from April through August, economists for Morgan Stanley wrote in a note last week.
But spending could take a hit based on how the labor market recovers and as uncertainty lingers around the upcoming presidential election and the timeline of a vaccine.
Conditions for the upcoming holiday shopping season look increasingly dim, Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note on Wednesday.
“We’re becoming very nervous about Q4 and, especially, the holiday season, in the likely absence of new fiscal stimulus,” he wrote. “Household incomes are now falling, at the most important time of year for retailers.”
European stocks found some stability on Friday, moving into positive territory after dropping more than 2 percent the previous day, the steepest decline in nearly a month. Futures in the S&P 500 index in the United States pointed to a rise when trading begins.
The benchmark Stoxx Europe 600 rose 1.1 percent, and the CAC index in France climbed 1.8 percent. Stock indexes in Asia were mixed. Earlier this week, the value of China’s stock market climbed above $10 trillion, the peak it reached in 2015 before the market crashed.
European shares fell on Thursday after Paris, London and other cities prepared to go into stricter measures to control the spread of coronavirus. There were already concerns that Europe’s economic recovery was losing momentum and these measures could further slow it down. But on Friday, a stream of positive earnings reports helped lift stock indexes.
The British pound gyrated, sharply sinking 0.75 percent before quickly recovering, as Prime Minister Boris Johnson said his government would abandon Brexit talks and proceed without a trade deal on Jan. 1 unless there was a “fundamental change in approach” from the European Union side. Thursday had been Mr. Johnson’s deadline for striking a deal. E.U. negotiators are expected to come to London next week for more talks.
Shares in LVMH, the French luxury goods company which owns Louis Vuitton and Givenchy, jumped more than 6 percent after the company said sales in its fashion brands rebounded in the third quarter. Shares in Christian Dior, also controlled by LVMH, rose 8 percent. Shares in the British luxury brand Burberry climbed more than 3 percent.
Daimler, the German manufacturer of Mercedes-Benz, said its third-quarter performance had been better than expected with a pretax profit of 3.1 billion euros. The automaker’s shares rose 5 percent.
A European aviation regulator told Bloomberg News that he was satisfied with upgrades to the Boeing 737 Max, increasing the chances the plane could return to the region’s skies by the end of the year. Final approval in Europe requires several more steps, but Boeing’s shares rose 2 percent in premarket trading
The best performing stock in Europe’s benchmark index was Thyssenkrupp, whose share rose more than 23 percent after Liberty Steel of Britain said it had made an offer to buy the German company’s steel unit.
Shares in JD Wetherspoon, a large chain of British pubs, dropped nearly 15 percent after the company reported its first loss since 1984. Its founder, Tim Martin, said curfews, lockdowns and changing regulations threatened “not only pub companies, but the entire economy.”
The Business Roundtable, a group of chief executives of major U.S. companies, announced on Thursday initiatives meant to advance racial equity and justice and to reduce the “economic opportunity gap in communities of color.”
The group said it hoped to:
Give $1 billion to community lending institutions, which provide funds for Black households and small businesses, by 2025.
Give $600 million in financial contributions to provide Black- and Latino-led Minority Depository Institutions with capital and deposits, by 2025.
Set up a system to mentor and support Black and Latino small-business owners, with a goal of reaching 50,000 businesses over the next five years.
“The racial inequities that exist for many Black Americans and people of color are real and deeply rooted,” Doug McMillon, president and chief executive of Walmart and chairman of the Business Roundtable, said in a statement. “These longstanding systemic challenges have too often prevented access to the benefits of economic growth and mobility.”
PepsiCo, a member of the Business Roundtable, said on Wednesday that it was committing more than $170 million over five years to support initiatives to “empower Hispanic Americans.” The company said it would expand Hispanic managerial representation to 10 percent of the company’s work force by 2025 by hiring 120 Hispanic managers, including 50 executives.
There was one major talking point this week for executives on earnings calls and in media appearances: the stalled negotiations over another pandemic stimulus bill.
“The medium to longer term is still highly uncertain in particular as it relates to future stimulus. And so we remain heavily weighted to our downside scenarios.” — Jennifer Piepszak, the chief financial officer of JPMorgan Chase
“The pace of job growth and the rebound in consumer spending have slowed, and the diminished pace of reopening and the end of some stimulus programs are presenting headwinds.” — Charles Scharf, Wells Fargo’s chief executive
“There is talk of another stimulus in terms of its impact. We’ve assumed that kind of a bit later, in terms of in the first quarter of 2021.” — Mark Mason, the chief financial officer of Citigroup
“For both sides, I think what they need to keep in mind is that there are Americans that need them, that don’t really care about politics, aren’t really tied up in this election and they just need some help.” — Doug McMillon, Walmart’s chief executive, on CNBC
“The consumer number in my view is going to be highly dependent on whether they provide more fiscal stimulus, which I think they absolutely need to do.” — William Demchak, the chief executive of PNC Financial Services
Many companies do not expect their workers to return to offices until next summer, and even then things may never be the same as before, judging by the comments executives made this week, highlighted in today’s DealBook newsletter.
On earnings calls, executives from Goldman Sachs said that about a third of workers in New York and London were coming in regularly; at JPMorgan Chase, it’s around 20 percent in both cities; and Citigroup said “a small percentage” of employees in North America had returned.
“Being together enables greater collaboration, which is key to our culture,” said David M. Solomon, Goldman’s chief. But Jamie Dimon of JPMorgan acknowledged that some working habits may have changed permanently, which “will ultimately reduce the space you need for your employees.” Terrance R. Dolan, the finance chief at U.S. Bancorp, told analysts that the bank will most likely “consolidate” its corporate real estate to reflect “the new horizon.”
Is that a problem? Steven J. Goulart, the chief investment officer at MetLife, said at a regulatory round table that the “pressure to de-densify” offices to support social distancing could support demand for real estate even if buildings aren’t as full as before.
And as executives conduct more business remotely, going back to in-person meetings and pitches seems less urgent. Natarajan Chandrasekaran, the chairman of Indian conglomerate Tata Sons, said in an interview with The New York Times that he used to fly from India to the United States to pitch a $50,000 project. But recently, he said, his firm’s consultancy business closed $2 billion worth of deals in “five or six Zoom calls.”
There are other perks from working at home. BlackRock’s Laurence D. Fink is excited about what employees could do with the time they save on daily commutes. “They could spend two hours improving their health by exercising,” he said on a conference call. “They could spend two hours more in building a deeper, stronger, more resilient family.”
Paul Draovitch of Duke Energy said at an investor event that working from home was “not without risks,” but also brought certain benefits: “When my Pomeranians walk into the room, it’s really a pleasure.”
Ephrat Livni contributed reporting
A British regulator said on Friday it had fined British Airways 20 million pounds, or $25.9 million, for lax security that led to a data breach in 2018, in which hackers stole data of more than 400,000 British Airways customers. The fine is much less than the £183 million originally suggested in 2019.
Every airline is struggling, but each struggles in its own way.
United Airlines relies far more than its rivals on international travel, which is expected to take far longer than domestic travel to bounce back. So the airline is fine-tuning its business, from maintenance to flight planning, as it tries to predict where a wary public will fly, reports Niraj Chokshi.
“We can really throw away the crystal ball, which was hazy to begin with,” said Ankit Gupta, United’s vice president for domestic network planning.
When the virus devastated travel in March and April, United took hundreds of planes out of circulation. Since July, it has brought back more than 150, including those flown by regional carriers, but about 450 are still stashed away.
To understand when and how demand might recover, United is tracking indicators like national travel restrictions, the travel habits of dual citizens and the economic ties between countries. “It’s a bit of gut feeling, to be quite candid,” said Patrick Quayle, who oversees the airline’s international network planning.
Most of the people still flying are staying within the country, visiting friends and relatives or vacationing outdoors. So the airline is gauging how many flights to add to snowy destinations, while adding winter service to Florida from the Northeast and the Midwest. It also plans to expand service on dozens of routes to tropical destinations near and within the United States.
Whatever happens in the months to come, said Tom Doxey, United’s senior vice president for technical operations, “we have a plan in place.”