A worker wears a protective mask at the Volkswagen assembly line in Wolfsbrug after Europe’s largest car factory restarted production in April. Photograph: Reuters
A worker wears a protective mask at the Volkswagen assembly line in Wolfsbrug after Europe’s largest car factory restarted production in April. Photograph: Reuters
The German economy had already flirted with recession over the past few years, with the manufacturing industry in particular seeing declining output.
However, the coronavirus pandemic has tipped it over the edge, with two consecutive quarters of falling GDP - the technical definition for a recession.
And thanks to some statistical revisions, #Germany was already in technical recession before the worst started. 4Q 19 GDP growth was revised downwards to -0.1% QoQ.
The German federal statistics office has revised down its reading for the fourth quarter of 2019 to -0.1% - which means the German economy is already in recession.
German economy contracts 2.2% QoQ in 1Q, biggest slump since Q1 2009, but German fared a lot better than Italy (Q1: -4.7%), Spain (Q1: -5.2%) or France (-5.8%). German 4Q GDP Revised to -0.1% from 0.0% on quarter so #Germany already in recession. pic.twitter.com/lM7RVs9r0N
— Holger Zschaepitz (@Schuldensuehner) May 15, 2020
The report from Germany’s federal statistics office shows how brutal the hit was: only in the second quarter of 2009 has growth been lower for the country since unification.
And the office warned that it was only really in March that the coronavirus pandemic hit, meaning there is likely much worse to come in the second quarter:
The corona pandemic hits the German economy hard. Although the spread of the coronavirus did not have a major effect on the economic performance in January and February, the impact of the pandemic is serious for the 1st quarter of 2020. [...] That was the largest decrease since the global financial and economic crisis of 2008/2009 and the second largest decrease since German unification. A larger quarter-on-quarter decline was recorded only for the 1st quarter of 2009 (-4.7%).
Germany’s economic output shrank by 2.2% in the first three months of the year, according to the German statistics agency, the largest quarterly decrease since the financial crisis.
Royal Mail boss Rico Back resigns with immediate effect
Rico Back stepped down on Friday as chief executive of Royal Mail. Photograph: PR
Royal Mail chief executive Rico Back has stepped down with immediate effect, it announced on Friday morning.
Back will receive salary and benefits until 15 August, plus another £480,000, representing nine months’ pay in lieu of notice.
He also received £50,000 towards “legal fees incurred in connection with his departure”. Royal Mail did not give a reason for him leaving.
Keith Williams becomes interim executive chair of Royal Mail Group and Stuart Simpson becomes interim chief executive of Royal Mail (UKPIL), its main parcels and letters business.
No bonuses will be paid to executive directors for 2019-20, and £25m has been set aside for cash awards for frontline staff “in recognition of their role during Covid-19”.
Revenues were down by £22m year-on-year in April, Royal Mail said, with letter volumes down by 33%. High levels of absence during the pandemic have contributed to £40m in new UK costs.
Back’s resignation comes after a tumultuous time at Royal Mail, with fraught and sometimes furious negotiations with unions over strike action and struggles in its core business - before the coronavirus pandemic hit.
The postal service handed Back an annual deal worth up to £2.7m if he hit bonus targets, on top of a £6m “golden hello” for leaving the company’s European subsidiary.
Oil prices hit one-month high amid signs of demand pickup
Oil prices have risen as investors look for tentative signs of emerging demand for fuel.
Brent crude futures prices, the international benchmark, have risen by 3.4% today to a high of $32.44 per barrel.
After the astonishing market moves of last month - that briefly saw US crude futures prices fall far below zero - a 3.4% gain barely seems noteworthy. But the rebound in oil prices does tell us that traders are starting to see green shoots of economic recovery - the same story that appears to be helping stock markets.
While still low by historic standards (indeed, low by the standards of January - see chart), it nevertheless represents a doubling of prices from Brent’s fall to below $16 per barrel during last month’s turmoil.
Brent crude oil futures prices rose on Friday as traders saw signs of increasing demand - but still remained far below January levels. Photograph: Refinitiv
Reuters reports:
Data released on Friday showed China’s daily crude oil use rebounded in April as refineries ramped up operations.
The market mood remains less than euphoric, though, with the coronavirus pandemic far from over and new clusters emerging in some countries where lockdowns have been eased.
“Market forces have aligned producers around the world to support fundamentals, and demand is increasingly showing signs of having troughed,” Barclays analyst Amarpreet Singh said in a note.
“However, the sheer size and speed of the disruption and associated inventory overhang will take time to get fully absorbed, in our view,” he said.
Luxembourg’s China-born Ni Xialian practices her table tennis before coronavirus lockdowns. Photograph: François Lenoir/Reuters
Betting giant William Hill has put out an update on its results in the year to 28 April, highlighting the massive fall off in revenues as lockdown hit.
The bookmaker’s revenues slumped 57% year-on-year after 11 March, with sports betting down 83% in its retail branches.
However, it only fell by 56% online as gamblers turned to more esoteric interests in search of entertainment: “table tennis and emerging market football”. Online gaming revenues also increased during the period.
You can read more on the unusual gambling patterns during lockdown here, including an increase among regular gamblers:
The company said it has delayed recruitment, cancelled salary increases and all bonus payments and incentive schemes for 2020, furloughed employees and used government support schemes, including business rates relief.
It has also suspended its dividend, cancelled spending plans and cut marketing costs.
But it has access to £700m in ready cash or equivalents - with the monthly cash outflow limited to only £15m (even if costs will rise as the UK’s furlough scheme tapers away).
The FTSE 100 has gained 1.4% in the opening minutes of trading, while the FTSE 250 is up 1.3%.
Across Europe stocks are also looking positive, with France’s Cac 40 up 1% and Spain’s Ibex up 0.8%. The Dax in Germany has posted a 1.6% gain - let’s see if that holds.
Transport for London faces £3bn budget shortfall this year
Mark Sweney
A woman wearing a face mask walks past Leicester Square Underground station in London. Photograph: Yui Mok/PA
Transport for London has this morning said that it is facing a £3bn hole in its finances this year due to the impact of the coronavirus, meaning further help government help may be necessary for the authority.
TfL, which on Thursday agreed a £1.6bn bailout from the government to keep the business running until October, has seen a 90% fall in income as journeys on London’s buses and underground have dried up during the nationwide lockdown.
TfL said that a financial forecast, assuming the prioritisation of essential services and activities, will see a £1.9bn funding gap in its first half year to the end of October. For the full year to the end of March 2021 that gap is forecast to be £3bn.
Trump's China bashing and eurozone GDP in focus for investors
Good morning, and welcome to our live coverage of business, economics, and financial markets.
We know it’s bad, but just how bad? That is the question facing economists and markets this morning as they await German and Eurozone GDP data as well as the prospect of worsening US-Chinese relations.
German GDP data expected at 9am BST (unusually) will fill in the final piece of the puzzle for just how badly the eurozone was hit in the first three months of the year.
Reuters’ poll of economists shows an average expectation of a 2.2% decline in first-quarter German GDP. And remember, although China was hit hardest in the first quarter, there is much worse to come for Europe in the April-to-June period.
Here’s what has happened so far among rich economies (up to Wednesday):
UK GDP fell 2%q/q in the first quarter of the year (1st estimate), as Coronavirus effect hit in March. Largest GDP fall since 2008, although the figure for Q2 will see a far bigger fall. France's GDP currently hardest hit in Q1 among OECD countries that have reported. pic.twitter.com/7wQUmkmVEQ
Adding to the uncertainty is concern over the trading relationship between the US and China. In an interview published last night President Donald Trump suggested that cutting ties with China would be an option and said that the Chinese failure to contain the disease had affected the trade deal between the two countries.
Here are quotes from the Reuters report on the Fox Business Network interview:
“They should have never let this happen,” Trump said. “So I make a great trade deal and now I say this doesn’t feel the same to me. The ink was barely dry and the plague came over. And it doesn’t feel the same to me.”
Trump also suggested his relationship with Xi had deteriorated.
“But I just – right now I don’t want to speak to him,” Trump said in the interview, which was taped on Wednesday. [...]
“There are many things we could do. We could do things. We could cut off the whole relationship,” he replied.
Yet at the same time the easing of lockdowns around the world (despite the absence of a coronavirus vaccine) has given hopes for the future, giving a mild boost to stock markets in Asia and Europe on Friday morning.
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