Connect with us


European G.D.P. Shrinks by Historic Margin



Percentage change from previous quarter

Percentage change from previous quarter

The European economy tumbled into its worst recession on record in the second quarter, as quarantines in countries across the continent brought business, trade and consumer spending to a grinding halt.

From April to June, gross domestic product fell from the first quarter by 11.9 percent in the 27 member states of the European Union, and by 12.1 percent in countries that use the euro currency, according to figures released on Friday by Eurostat, the bloc’s statistics agency.

On an annualized basis, European Union economies shrank by 14.4 percent, and eurozone economies by 15 percent, the sharpest contractions since statistics started being kept in 1995.

But there were signs that the worst may have passed since then, and that a tentative recovery was gaining some traction as governments unleashed enormous stimulus spending. Lengthy lockdowns, while painful for business and industry, have helped curb a widespread resurgence of the pandemic in most countries, easing reopenings.

The data was especially grim for nations on Europe’s southern rim, which were among the worst affected by the virus and which faced longer quarantine periods than northern European countries.

In Spain, which has had one of Europe’s highest death tolls, the economy shrank by a staggering 22.1 percent from a year ago and by 18.5 percent from the first quarter. France, the eurozone’s second-largest economy, shrank by 19 percent from a year ago and by 13.8 percent from the first quarter; and Italy, the third-largest economy in the zone, contracted by 17.3 percent from a year ago and by 12.4 percent from the first quarter. France is officially in recession, with three straight quarters of contraction.

On Thursday, the authorities reported that the German economy, Europe’s largest, shrank by 11.7 percent from the same period last year and by 10.1 percent from the previous quarter.

European Union leaders last week agreed to a landmark stimulus of 750 billion euros, or about $884 billion, to rescue their economies and to anchor a mild turnaround that had started to take hold after lockdowns began to be lifted.

But risks abound as surges in new cases are reported, increasing the possibility of more quarantines.

“The hard part of this recovery is set to start about now,” Bert Colijn, senior economist for the eurozone at ING Bank, said in a note to clients.

Credit…Kamil Zihnioglu/Associated Press

European countries have, for the most part, contained the spread of coronavirus. But the outbreak, which was early and widespread, has left a deep scar on the region’s economy: A 12 percent contraction in the second quarter of the year compared with the first quarter. Different government interventions and infection rates means the impact has been uneven. Here are snapshots from the region’s largest economies in the three months that ended in June.

Though France’s 13.8 percent decline is stark, a mild rebound in consumer spending and business activity after quarantines were lifted has helped the country avoid a far sharper decline. In fact, the nation’s central bank recently revised its economic forecasts, expecting slightly less damage in the next few years.

The government’s largess has been key: It spent over 100 billion euros ($118 billion) to pay businesses not to lay off workers, it delayed deadlines for business taxes and loan payments, and deployed over 300 billion euros in state-guaranteed loans to struggling companies.

The 10.1 percent drop in Germany’s G.D.P., the largest since the country began keeping quarterly records, might already be painting a darker picture of the economy than is warranted. Separate data released Thursday showed the labor market stabilized in July and surveys of business activity indicate a quick rebound.

But the continuation of this recovery is at risk. Germany was in a better position than other European Union countries because the government was effective in containing the spread of the coronavirus. However, there is now an increase in new infections as Germans return from holidays abroad, stoking fear of a second wave.

The devastating economic impact of Italy’s outbreak and lockdown, the first in Europe, was a 12.4 percent drop in G.D.P. While the central bank estimates that two government relief packages mitigated the contraction, a slow return in tourism, consumer spending, and business investment is dragging the recovery down.

“At least for Italy, the possibility of a V-shaped recovery is not what we have in front of us,” Bank of Italy’s governor, Daniele Franco, said. One slice of the economy is experiencing a stronger rebound: industrial production. During the first phase of the lockdown, which ended in early May, half of the Italian companies that were forced to shut managed to reopen, the central bank said.

Spain’s recession is the deepest of all the European countries that have reported second-quarter G.D.P. so far. The economy contracted 18.5 percent compared to the first three months of the year, and the outlook for the rest of the year is grim. Spain officially ended its Covid-19 state of emergency on June 21, but it has since been struggling with an increase in the number of new cases and over 300 local outbreaks, particularly severe in the northeast.

Tourism is a substantial component of the Spanish economy but hopes of a tourism-led economic recovery this summer have been undermined by quarantine restrictions placed on the nation and its islands by Britain and other countries.

Credit…Loren Elliott/Reuters

Exxon Mobil announced a record-breaking quarterly loss of $1.1 billion, blaming the coronavirus pandemic for lowering oil and gas prices and sales volumes.

The results from the largest American oil producer were further evidence of the deepest downturn for the industry in the modern era. Oil prices have recovered in recent weeks to around $40 a barrel, but that is still roughly a third below the oil price of the beginning of the year.

Chevron, the second largest U.S. oil company, also posted disappointing results for the quarter on Friday and said it was writing off its $2.6 billion investment in Venezuela because of the country’s political instability and American sanctions against its government.

Exxon’s oil production was down 3 percent and natural gas output was down 12 percent, compared to the quarter a year ago, a reflection of the crippling of global demand for energy due to a worldwide recession.

Darren W. Woods, Exxon’s chairman and chief executive, attempted to put the best face on the results.

“The global pandemic and oversupply conditions significantly impacted our second quarter financial results,” he said. “We responded decisively by reducing near-term spending and continuing work to improve efficiency. The progress we’ve made to date gives us confidence that we will meet or exceed our cost-reduction targets.”

The $1.1 billion loss compares to a profit of $3.1 billion a year ago. At the same time the company’s capital and exploration expenditures were down to $5.3 billion from $8.1 billion in the quarter last year.

Chevron said it lost $8.3 billion in the quarter; a year earlier it reported a $4.3 billion profit.

The company reported an adjusted quarterly loss of $3 billion, excluding one-time items, compared to adjusted earnings of $3.4 billion in the same quarter of 2019. In addition to the $2.6 billion Venezuelan write down, Chevron also took a $1.8 billion write down based on the company’s oil and gas price outlook.

Chevron reported sales and other revenue of $16 billion, compared to $36 billion in the same period a year earlier.

“We’re focused on what we can control,” Michael K. Wirth, Chevron’s chairman and chief executive, said in a statement. “We’re transforming our company to be more efficient, agile and innovative.”

Exxon and Chevron said they would maintain their dividends.

Credit…Joe Burbank/Orlando Sentinel, via Associated Press

United plans to add more than 25 international routes to its September schedule, a sign of limited optimism in a battered industry at a time when coronavirus cases continue to rise across the country.

Many of the new routes include destinations in Europe and Asia where governments currently restrict or limit American visitors. United said it would adjust its schedule as necessary to deal with travel and quarantine restrictions.

“We continue to be realistic in our approach to building back our international and domestic schedules by closely monitoring customer demand and flying where people want to go,” Patrick Quayle, United’s vice president of international network and alliances, said in a statement.

Many people are still flying for essential business, to visit friends and family or to return home. Some of the shorter international flights United is adding will serve limited demand for leisure travel.

The airline said it will launch a new route connecting Chicago and Tel Aviv if it is able to obtain government approval. The airline will also resume service between some of its American hubs and Amsterdam, Frankfurt, Munich, Sydney, Costa Rica, St. Thomas, Ecuador and several destinations in Mexico. United also plans to continue to fly to New Delhi and Mumbai and between Chicago and Hong Kong, pending government approval.

Overall, the airline plans to operate about 37 percent of the flights it flew last September, a four-point increase from August. The Transportation Security Administration has only screened about 26 percent as many people at its checkpoint in recent days as it did on the same days a year ago.

Credit…Hiroko Masuike/The New York Times

Government payments played a critical role in propping up the American economy, data released Friday shows.

Consumer spending rose 5.6 percent in June, the Commerce Department said, the second straight monthly increase after a record-setting plunge in April.

But the end of some benefits, namely the $1,200 payment made to many individuals, also meant that personal income fell 1.1 percent last month. Incomes could fall further now that the federal government’s additional unemployment benefits have ended, at least temporarily.

To understand what’s happening, it helps to go back to the beginning of the pandemic. When businesses began shutting their doors and furloughing workers in March, both incomes and spending fell. Congress then stepped in with a multi-trillion-dollar rescue package, which included sending $1,200 checks to most American families and expanding the unemployment insurance system.

As a result, personal incomes rose a record 12.1 percent in April, despite a big drop in wage and salary earnings. But spending still fell, at least in part because people had fewer opportunities to go shopping and dine out. (Other data suggests spending fell sharply among the wealthy, while rebounding more quickly for other income groups once government checks began arriving.)

In May and June, those patterns began to reverse. Spending picked back up as the economy reopened. Wage and salary incomes rose too, as companies began rehiring furloughed workers. Government payments fell with the end of the $1,200 checks, but remained high.

The net result: Overall personal income was higher in June than in February. But without government intervention — especially the expanded unemployment benefits, which are injecting money into the economy at a rate of $1.4 trillion a year — incomes would be lower now than when the crisis began.

Spending has rebounded but remains almost 7 percent below its precrisis level, even with the government help. And now, that help is in danger of running out: The $600 a week in extra unemployment benefits expires today, and senators have left for the weekend.

Stocks gave up their early gains on Friday as gnawing concerns about the economic toll of the pandemic contended with a surge in profits reported by America’s largest tech companies.

The S&P 500 was slightly lower, after earlier rising about half a percent. The index is still on track to end July with a gain of about five percent. The index has climbed for four consecutive months — rising about 25 percent since the end of February.

A big factor behind that rally has been the success of big technology companies, which were well positioned to benefit from a shift to remote work and limits on public activity.

On Thursday, investors heard just how much they benefited. Amazon, Apple and Facebook reported surging profits. The blockbuster earnings seemed to briefly put aside the uncertainty and pessimism surrounding the economic impact of the pandemic, but also perhaps underscored the concerns of lawmakers, expressed on Wednesday, that American’s tech giants have gotten too big.

Shares of Amazon, Apple and Facebook rose on Friday and lifted the Nasdaq composite. Alphabet, the parent company of Google, which reported its first-ever decline in quarterly revenue on Thursday, was lower.

But the virus continues spreading, and its damage is mounting. On Thursday, the United States reported that its economy fell 9.5 percent in the second quarter, compared with the previous quarter, the most on record. On Friday, the authorities reported that the eurozone contracted 12.1 percent in the second quarter. Both the United States and Europe are in deep recessions caused by shutdowns in economic activity to curb the spread of the disease.

Credit…Clockwise from left: Jason Henry for The New York Times, Victor J. Blue for The New York Times, Philip Cheung for The New York Times, Jim Wilson/The New York Times

A day after lawmakers grilled the chief executives of the biggest tech companies about their size and power, Alphabet, Amazon, Apple and Facebook reported surprisingly healthy quarterly financial results, defying one of the worst economic downturns on record.

Even though the companies felt some sting from the spending slowdown, they demonstrated, as critics have argued, that they are operating on a different playing field from the rest of the economy.

Combined, the companies reported $28.6 billion in quarterly net profit, underscoring how regulatory scrutiny remains more background noise and a distraction for them rather than an imminent threat to their businesses.

“The strong continue to get stronger,” said Dan Ives, managing director of equity research at Wedbush Securities. “As many companies are falling by the wayside, the tech stalwarts continue to gain muscle and power in this environment.”

The editors and reporters for the DealBook newsletter sift through a lot of company reports and dial into many earnings conference calls. A huge number of companies reported their latest financial results on Thursday, and aside from the tech giants’ bumper profits these are some of the things that caught our notice, from lapsed cereal eaters to “coronabeards.”

🍺 “To put a finer point in the level of demand we’re seeing, we eclipsed July 4 week shipment days in the United States four times already this year. That’s unheard of.” — Gavin Hattersley, the C.E.O. of Molson Coors

🇯🇵 “We would be in Tokyo right now under normal circumstances. So it’s a total bummer for our company that we don’t have the Olympics.” — Jeff Shell, the C.E.O. of NBCUniversal

🥣 “Special K gained share in quarter two as did Mini-Wheats and Raisin Bran. We are also excited about the consumer trial and rediscovery we are seeing from new and lapsed users in cereal.” — Steven Cahillane, the C.E.O. of Kellogg’s

🧔 “As people go back to work in offices and outside the home, we’ll see a pickup in the wet shave rate.” — David Taylor, the C.E.O. of Procter & Gamble, in response to an analyst question about the rise of mullets and “coronabeards” during lockdowns

🍩 “I love when we really get on our doughnut mojo, but look, we are leaning into beverages in a big way.” — David Hoffmann, the C.E.O. of Dunkin’ Brands

Credit…Lewis Smithingham

With Zoom call fatigue setting in and boozy lunches out of the question during the coronavirus pandemic, housebound executives are finding new ways to meet and bond in video games. The goal is to break up a day that is crammed with get-togethers that generally look, sound and feel identical.

And for people like Lewis Smithingham, an advertising executive in Brooklyn, an outing in virtual space is a chance to form memories with people he has never met, which is a crucial part of developing relationships, business and otherwise.

“It’s my golf,” he said. Unlike golf, video games come with social distancing built in. It is back slapping without the slapping or the back, ideal during a pandemic.

Nobody knows how many executives are meeting in video games, including game publishers, but examples are popping up on Twitter and other social media platforms.

The idea of holding business meetings in a virtual world enjoyed a certain vogue about a decade ago. More than 1,400 organizations had a presence on Second Life, an online realm with everything an avatar would need, including auditoriums and beer.

For Mr. Smithingham, different games offer advantages for different clients. Gunplay and mayhem is not always the right fit. He is a fan of Animal Crossing: New Horizons, a new version of a long-popular Nintendo game, which was released in March.

“My production value is now considerably better in Animal Crossing than it is on Zoom,” he said.

Credit…Washington Alves/Reuters

Fiat Chrysler reported a net loss of 1 billion euros ($1.2 billion) in the second quarter, but said it expects improving economic conditions to lift its fortunes in the second half of the year.

Forced to shut down operations in Europe and North American for much of the quarter because of the pandemic, Fiat Chrysler said revenue dropped 56 percent, to 11.7 billion euros. It also used some 5 billion euros in cash.

In a conference call, the automaker’s chief executive, Mike Manley, said auto sales are recovering faster than had been expected, and the company has been able to ramp production back to normal levels in North America. Its European plants should return to typical production levels in the third quarter, the company said.

“We expect significant improvement in profitability and cash flows,” he said. “We expect a much, much better second half.

The automaker also plans to introduce five new electric vehicles in the coming months, including plug-in hybrid versions of three different Jeep models.

Fiat Chrysler is in the process of merging with French automaker PSA Group, maker of the Peugeot and Citroën brands. The combined company will be called Stellantis.

Europe has a bad rep with investors. For years, asset managers and bank strategists have characterized the region by its anemic growth rate and shaky political union, and steered investors away.

Now, a crisis has turned into an unlikely investment opportunity as the region appears to have handled the pandemic better than some other parts of the world. In the past few months, European assets have staged a comeback, writes Eshe Nelson, who gives two reasons for the turnaround:

The euro has gained more than 5 percent against the dollar so far this year, according to FactSet data. Since late May, Europe’s stock market has recorded stronger gains than the S&P 500 index, after taking the strength of the euro into account.

Investors are starting to take advantage of the relative cheapness of European equities, but a sustained recovery in either stock market will depend on consumer and business confidence returning, which would in turn stir economic activity.

Here’s some of what happened on Thursday that you might have missed.

  • Ford Motor said it earned $1.1 billion in the second quarter as a large one-time gain in the value of its investment in an autonomous driving company more than offset losses in its main business. Without the gain, from its stake in Argo AI, Ford lost $1.9 billion excluding interest and taxes. The result was better than Ford’s earlier forecast of a pretax loss of $5 billion.

  • United Airlines warned its pilots that it might need to expand planned furloughs if demand for flights remained deeply depressed and a vaccine was not mass produced by the end of next year. The airline previously said that it could furlough up to one third of its pilots, or 3,900 people, this year and next.

  • Comcast, the largest cable operator in the U.S., said that Peacock, its new streaming product, attracted 10 million sign-ups in its first three months.

  • California Pizza Kitchen filed for bankruptcy protection in Texas. The company, which operates more than 200 locations in the United States and internationally, said it would use the restructuring process to close unprofitable locations and cut debt, and planned to emerge from bankruptcy in less than three months.

The Trump administration announced new sanctions Friday on two Chinese officials and one government entity, citing human rights abuses against predominantly Muslim ethnic minorities in the Xinjiang region in China’s far west.

The sanctions, administered by the Treasury Department’s Office of Foreign Assets Control, effectively cut the Xinjiang Production and Construction Corps and two of its former officials, Sun Jinlong and Peng Jiarui, off from American property and the financial system. The Xinjiang Production and Construction Corps is an economic and paramilitary organization in charge of economic development in the region.

“The United States is committed to using the full breadth of its financial powers to hold human rights abusers accountable in Xinjiang and across the world,” Steven T. Mnuchin, the Treasury Secretary, said in a statement.

Ties between the United States and China have been fraying as the Trump administration takes an increasingly critical posture on China’s handling of coronavirus, its growing influence over Hong Kong, its territorial disputes in the South China Sea and its treatment of a largely Muslim minority in Xinjiang.

The Chinese government has carried out a campaign of mass detentions in Xinjiang, placing one million or more members of Muslim and other minority groups into large internment camps intended to increase their loyalty to the Communist Party.

On July 20, the Trump administration added 11 new Chinese entities, including firms supplying major American brands like Apple, Ralph Lauren and Tommy Hilfiger, to a list that cuts them off from purchasing American products without a special license, saying the firms were complicit in human rights violations in Xinjiang. On July 1, the administration issued a warning to businesses with supply chains that run through Xinjiang to consider the reputational, economic and legal risks of doing so.

Source link

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


Centerville business raises funds for church disaster relief group – Dayton 24/7 Now




Continue Reading


Gainesville teen charged with murder in shooting at Gwinnett business




The building was occupied by multiple employees when Brandt opened fire, Gwinnett police spokesman Cpl. Collin Flynn said. According to police, he wore a white balaclava-style face covering that showed only his eyes

Bryant Armstrong, an employee of Direct Technologies, told Channel 2 Action News that he and his coworkers believe the gunman entered the business through a warehouse bay door. He said he heard several gunshots but never saw the shooting victim. He fled to the break room with several other coworkers before leaving the building, he said.

“You don’t expect on a Friday at 2 p.m. to hear gunshots ring out at a super-small office park,” Armstrong told the news station.

Police said one employee was injured while running away from the scene, but Ross was the only person shot.

Brandt remains held at the Gwinnett County jail without bond, online records show.

Source link

Continue Reading


Maine’s small-business sector still in crisis after reopening




The bulk of Maine’s commercial sector has been reopened for months, but many small-business owners say they are hanging on for dear life amid low consumer demand, tough health and safety restrictions and the existential threat of a viral resurgence that has ravaged other states.

While companies report some sales stability, spending at contact-intensive businesses is far below what it should be, and some worry their very survival is at risk in poor economic conditions that show no sign of improving soon.

“It all comes down to the fact that the virus itself is still spreading in the country in a way that it is hard to do business and makes it hard for people to consider that anything could possibly be normal,” said Mary Alice Scott, executive director of Portland Buy Local, a merchant trade group that promotes local commerce.

Customer Chris Evans has the parking lot seating area to himself outside Coffee By Design’s Diamond Street location in Portland last Monday. Five of the company’s cafes have reopened now in the Portland area, says co-owner Mary Allen Lindemann. Derek Davis/Staff Photographer Buy this Photo

A recent survey of 85 of the group’s members reflected a grim environment for retailers, restaurants and other locally owned businesses.

About a third of respondents said their revenue was 20 percent or less of what they made at the same time last year, according to Scott, and nearly as many said they were considering closing for good. Only a small handful said they were generating at least 80 percent of their normal revenue.

Every business faces different circumstances, but there is one constant: With heavy precautions and restrictions in place, and new COVID-19 cases reported daily in Maine, consumers haven’t resumed their pre-pandemic spending behavior. Still, protecting the community was the No. 1 concern for most businesses surveyed, Scott said.

“The thing we keep coming back to is the virus itself is the main problem,” she said. “We can’t move forward without addressing that first.”

Economists have for months tied economic success to tackling the public health threat. That appears no less true now than it was in April, even as Maine has done better than nearly every other state at containing the coronavirus and protecting its health care system.

“Our whole thing is to stay as small as we can and survive, to get through it so we can come out the other side and still be a viable entity,” said Adam Powers, co-owner of Elsmere BBQ and Wood Grill in Portland and South Portland.

Margaux Rioux of Portland works on her laptop while enjoying a drink at Coffee By Design on Diamond Street on Monday afternoon. “I was going to sit outside, but it is so hot”, she said, “Plus I have a friend,” referring to an inflatable monster inside the coffee shop. Derek Davis/Staff Photographer Buy this Photo

Powers said he feels lucky that barbecue translates well to takeout and customers have gravitated to in-person patio service. But sales remain far below what they should be.

The restaurants are closed three days a week and have limited hours because they’ve had trouble finding enough staff. Powers doesn’t expect business to recover fully until sometime next year.

“This is not going away,” he said. “We are not on the way up; we have a long road ahead of us.”


Seasonally adjusted data for Maine consumer spending in mid-July show spending was just about even with the level in January, and small-business revenue was only down 20 percent from the beginning of the year, according to Opportunity Insights, a real-time economic tracker developed by Harvard and Brown universities using private credit card and payroll processing data.

But economic activity is uneven. Leisure and hospitality revenue was down 57 percent from January, while retail and transportation revenue was down more than 13 percent, according to the tracker.

Those findings closely match state spending records. Maine Revenue Services said last week that tax receipts for prepared foods in June were about 35 percent below the same time last year. Hotel and lodging tax receipts were down more than 60 percent.

Meanwhile, taxes on general merchandise recovered in June to the same level as in 2018 and 2019, building supply sales were at least 22 percent higher and other retail sales were at least 55 percent higher than the prior year between April and June.

Wealthier households with more discretionary income have reduced their consumer spending to a greater extent than middle- and low-income families, according to Opportunity Insights.

Some high-income consumers have converted much of their spending into savings and investment, said Sheena Bunnell, a business economics professor at the University of Maine at Farmington. Consumer reaction to the external threat of the virus now drives large parts of the economy, she said.

“There is a lot of changes in behavior going on, and everyone doing it at a different pace and adapting differently, and that is changing the economy,” Bunnell said. “It’s definitely a financial struggle for a lot of our small businesses as they are trying to cope with living in a pandemic. The reality is, they don’t know how long they are going to be able to survive in this environment.”

Despite the challenges, some business owners feel more optimistic now than they did in the dark days of stay-at-home orders, fear and uncertainty this spring. Businesses with fewer than 100 employees are an outsize segment of Maine’s economy, employing more than 56 percent of the state’s workforce, according to the U.S. Small Business Administration.

When Momentum barbershop in Portland opened its doors in May after being closed for more than a month, it was booked solid for weeks by customers desperate to escape their homes and get a haircut.

It took about a month for the “die-hards and the desperates” to filter out, and business slumped, said owner Jason Dodge. So far, his sales are down about about 25 percent from a year ago. His summer business is down 40 percent.

Dodge said it’s enough to keep his head above water, but not enough to repair the pandemic’s damage to his business or invest for the future.

“There’s just nothing extra,” he said. “We’re doing good for now; the tough part is making up for time lost.”

Downtown Freeport, normally a bustling retail epicenter, is noticeably sedate this summer. On a recent Friday afternoon, parking lots were half-full and scattered groups of masked shoppers strolled and shopped at outlet stores, as opposed to the usual throng.

Susan Culkins, owner of The Mangy Moose gift shop on Freeport’s Main Street, opened as soon as she could in June. Traffic slowly grew through the month, and even though things are better now, sales are still way down from a year ago.

Jason Dodge, owner of Momentum barbershop, gives a haircut to CJ Manuel on July 24. Derek Davis/Staff Photographer Buy this Photo

“It has definitely gotten better, but it is nowhere near a regular year,” she said. Under state restrictions, Culkins can only have 15 customers in her store at a time. She’s shortened her hours and retained only three full-time and two part-time workers. In a normal year, she’d have at least a dozen people working for her right now.

Culkins said she feels confident even with a huge question mark hanging over her winter business.

“I feel cautiously optimistic,” she said.

Nearly every one of the retailers at The Maine Mall in South Portland is now open, and although customer traffic has been lower than normal, it is not the doom-and-gloom scenario some predicted, said General Manager Craig Gorris.

“That’s not what I see – when I talk to our tenants their sales numbers are really meeting their expectations,” Gorris said, adding that sales of athletic shoes and teen apparel skyrocketed right after stores reopened. “They are pleasantly surprised with what they see and what the numbers are – I am optimistic more than I am pessimistic.”

But consumer habits have changed significantly from earlier times. Gorris said shoppers now tend to come to the mall to make specific purchases instead of browsing for deals.

Jason Dodge, owner of Momentum in Portland, cuts CJ Manuel’s hair recently. “We’re doing good for now,” Dodge says. “The tough part is making up for time lost.” Derek Davis/Staff Photographer Buy this Photo

“People are shopping more for a purpose than they would just to go out and waste some time,” he said.

Still, not all is well at the mall. In July, department store Sears announced plans to close its Maine Mall location in September after nearly 50 years of operation, part of a nationwide downsizing effort. Many large, national retail chains have reported dismal financial results in recent months, and some have declared bankruptcy.


While economic activity is sluggish in Maine, consumer spending outpaces the national average. Maine and New England also show higher spending at restaurants, entertainment and retail outlets compared with states such as Texas, Florida and Arizona, which are facing massive outbreaks and fresh business closures, according to Opportunity Insights.

Overall consumer spending in Maine was almost 1.5 percent higher in mid-July than it was in January, after adjusting for normal seasonal changes. Apparel and general merchandise sales were up more than 16 percent, and spending on health care and groceries was slightly higher than at the beginning of the year.

But adjusted spending is still down from January in contact-intensive categories such as entertainment and recreation, where it is down almost 50 percent, and at restaurants and hotels, where spending is off about 22 percent.

Kevin Gaspardi, general manager at Coffee By Design on Diamond Street, repositions an inflatable unicorn after it blew over in the wind of Monday afternoon. The owner of the coffee shop decided to incorporate large inflatables when they were still only open for curbside pickup, but decided to keep them after seeing how they helped lighten the mood. “It was a way to put smiles on their faces in a time that has weighed so heavily on many people”, said Mary Allen Lindemann. Derek Davis/Staff Photographer Buy this Photo

Older Americans at higher risk of serious illness from COVID-19 comprise a critical portion of Maine’s consumer base, said Julieta Yung, an economics professor at Bates College. People over 55 years old contribute 40 percent of consumer spending in the U.S. and have an outsize impact in Maine, the oldest state in the country, Yung said.

“The fact that this vital segment of Maine’s population is at higher risk really emphasizes the need to prioritize containment strategies to allow Maine’s economy to reopen and people to feel safe and be able to go out, work, socialize and resume their normal activities,” Yung said.

Business success depends on multiple factors, such as cash reserves and government restrictions. The service sector, including tourism, restaurant, event and retail businesses, was hit particularly hard in the early days of the pandemic and will take longer to recover, said David Clough, Maine state director for the National Federation of Independent Business, a national trade group. In a recent NFIB national survey, more than 40 percent of respondents said it has been difficult to get customers to return.

“Unfortunately, some won’t make it at all depending on when restrictions on their operations are lifted, whether customers return, or if they run out of cash,” Clough said. “The direction things go in the next few months related to government policy and whether there is a resurgence of the virus are tied to their survival.”

Five Coffee By Design cafes are reopened now in the Portland area, and customer response has been positive, said co-owner Mary Allen Lindemann.

Reopening was hard. Lindemann laid off more than half the company’s 60-member staff after keeping them on initially when the business shut down this spring.

Alina Lindemann Spear serves drinks at Coffee by Design on Diamond Street on Monday afternoon. Derek Davis/Staff Photographer Buy this Photo

“The goal was to stabilize, to make sure we understand how much cash is coming in, taking time to cut everywhere we can and invest in ways that are important, and see as business starts to build back, to bring people back,” Lindemann said.

The company invested heavily in safety equipment and delayed reopening for anything beyond takeout until the staff felt comfortable, she said. But Lindemann said she’s nervous every day that she is putting staff and customers at risk.

“It is scary – what if we make a bad decision?” she said. “These are really life-or-death choices in many cases.”

An ongoing public health crisis is what has caused and deepened the recession, said Larry Wold, commercial markets president at TD Bank in Maine. There is no playbook for economic recovery in a situation almost no one has faced in their lifetime.

“This is not anything businesses owners did or didn’t do; this is something that descended on them completely unexpectedly,” Wold said.

Measures to stabilize the economy, such as loan payment deferrals, an added $600-per-week unemployment benefit and forgivable loans through the federal Paycheck Protection Program have run out or are nearly expired. Workers, businesses and local governments are desperate for more assistance, but political jockeying in Washington makes it uncertain when more aid will arrive.

In the meantime, Maine consumers need to make spending choices that help local businesses, Wold said. The money that goes into local economies stays there and will help prop up communities until the state gets to safer, better days.

“I hope it helps everyone appreciate just how challenging running a small business is in this world, let alone when something like this happens,” he said. “They deserve a ton of credit and a lot of support and a lot of admiration from our entire community.”

Use the form below to reset your password. When you’ve submitted your account email, we will send an email with a reset code.

Source link

Continue Reading