Financial authorities in the United States have officially declared that the country is in an economic recession. This announcement comes amid reports of record high unemployment (13.3% in May, down from 14.7% in April) and a major drop in the GDP during the first quarter of 2020. Reports on the second quarter won’t be ready for a few more weeks. The Q2 reading is expected to be a bit better, it will likely still mark an economic downturn in the United States.
The reason for the slowdown in the economy are the lockdowns imposed to help prevent the coronavirus from spreading and infecting more people. This meant businesses of all sizes - from small local shops to huge automobile factories - had to close down during the pandemic.
It is estimated that global economic growth will drop by 5.2% because of the coronavirus pandemic, according to data by the World Bank. The pandemic will have a slightly smaller impact on developing countries than it does on the developed ones, which will take a harder hit of 7 or more percent. The World Bank’s estimate is almost twice worse than an earlier prediction made by the IMF.
In other news, the oil market has turned bearish today. After the initial optimism caused by OPEC+ members deciding to extend their production cuts till the end of July and higher demand for oil from China, now the long-term risks for oil are back. The cuts are still predicted to be insufficient compared to the drop in demand globally, which will most likely keep oil prices low.
The Brent crude declined to $40.06, while the WTI reached $37.30.
Today stock indices are moving down as traders are claiming the profits earned from investing in the improving market conditions over the past few days.
