Tag Archives: U.S. Economy

U.S. factory activity near 2-1/2-year high; COVID-19 disrupting supply chains

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. factory activity accelerated to its highest level in nearly 2-1/2 years in December as the coronavirus pandemic continues to pull demand away from services towards goods, though spiraling new infections are causing bottlenecks in supply chains.

The strength in manufacturing reported by the Institute for Supply Management (ISM) on Tuesday likely helped to soften the blow on the economy in the fourth quarter from the relentless spread of COVID-19 and government delays in approving another rescue package to help businesses and the unemployed.

The ISM said the virus was “limiting manufacturing growth potential” because of absenteeism and short-term shutdowns to sanitize facilities at factories and their suppliers.

“U.S. manufacturing should fare reasonably well this winter as businesses need to restock inventories and the shift in consumer spending away from services to goods helps manufacturers,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania.

The ISM’s index of national factory activity rebounded to a reading of 60.7 last month. That was the highest level since August 2018 and followed a reading of 57.5 in November. A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy. Economists polled by Reuters had forecast the index would slip to 56.6 in December.

But some of the surprise rebound in the ISM index was due to an increase in the survey’s measure of supplier deliveries to a reading of 67.6 last month from 61.7 in November.

A lengthening in suppliers’ delivery times is normally associated with a strong economy and increased customer demand, which would be a positive contribution. But in this case slower supplier deliveries also indicate supply shortages related to the pandemic.

Nevertheless, demand for manufactured goods has been strong as the resurgence in new COVID-19 cases has led to fresh business restrictions across the United States, largely impacting the vast services sector.

A large section of the population continues to work and take classes at home, fueling a scramble for electronics, home improvement products and other goods like exercise equipment.

Computer and electronic products manufacturers said they continued to have “tailwinds from the COVID-19 pandemic research support for vaccines and treatments,” adding that “business picked up for us in the last month.”

Makers of miscellaneous products said “sales are now exceeding pre-COVID-19 levels.” Electrical equipment, appliances and components producers reported that business was stronger than expected, “with higher demand for many products.”

Despite strong demand, manufacturing output is still about 3.8% below its pre-pandemic level, according to the Federal Reserve. That could persist for a while as the new wave of infections causes disruptions to labor and the supply chain.

Food manufacturers complained the virus was “affecting us more strongly now than back in March.” Similar sentiments were echoed by transportation equipment makers who said the outbreaks were constraining suppliers. Plastics and rubber products also reported that their suppliers were having difficulty finding and retaining labor.

STRONG ORDERS GROWTH

The ISM report followed on the heels of data on Monday showing strong construction spending in November and October. Strength in the two sectors supports economists’ predictions that the economy grew at around a 5% annualized rate in the fourth quarter after a record 33.4% pace in the third quarter.

The manufacturing boost to gross domestic product would come through an accumulation of inventory by businesses.

The virus and depleted government pandemic money took a bite out of consumer spending in November. More than $3 trillion in government pandemic relief fueled growth in the July-September quarter after the economy contracted at a historic 31.4% rate in the second quarter. Nearly $900 billion in fiscal stimulus was approved in late December.

The ISM’s forward-looking new orders sub-index rose to a reading of 67.9 last month from 65.1 in November. Strong orders growth boosted manufacturing employment, which had contracted in November. The ISM’s manufacturing employment gauge rebounded to 51.5 from a reading of 48.4 in November.

But the supply chain gridlock is driving up costs for manufacturers. The survey’s prices paid index jumped to a reading of 77.6 last month, the highest since May 2018, from 65.4 in November. That raises the risk of higher inflation this year, though high unemployment could limit price pressures.

The labor market has lost steam in tandem with the economy since job growth peaked at a record 4.781 million in June.

According to an early Reuters survey of economists, nonfarm payrolls probably increased by 100,000 jobs last month after rising by 245,000 in November. That would mean the economy recouped about 12.5 million of the 22.2 million jobs lost in March and April. The government is scheduled to publish December’s employment report on Friday.

(Reporting by Lucia MutikaniEditing by Chizu Nomiyama and Paul Simao)

U.S. states enlist medical, nursing students to give out COVID-19 vaccine

By Tina Bellon and Melissa Fares

NEW YORK (Reuters) – U.S. states, facing a backlog in administering coronavirus vaccines, are asking medical and nursing students, and even firefighters, to help give the shots and free up healthcare workers battling a raging pandemic at overcrowded hospitals.

At least seven state health departments are seeking volunteers for their vaccination sites, some partnering with local universities or nursing schools to offer incentives such as tuition discounts and hands-on training. Others are teaching first responders to administer shots.

The national rollout of COVID-19 vaccines are the best hope to end a pandemic that has cost the lives of more than 320,000 Americans and crippled the U.S. economy.

This month, U.S. regulators authorized the first two COVID-19 vaccines, one from drugmakers Pfizer Inc and BioNTech SE and another from Moderna Inc.

As of Wednesday, nearly 10 million doses have been delivered across the country, but only about 1 million administered due to staffing shortages at hospitals and the special requirements for preparing the shots. The slow pace of the vaccination campaign threatens the federal government’s goal of inoculating nearly 20 million people by year’s end.

While inoculation is currently focused on frontline healthcare workers, the vaccination drive is expected to expand to tens of millions of essential industry workers beginning in January or February.

From New York to Tennessee, states are hoping medical and nursing students will free up medical staff focused on tending to the record numbers of new COVID-19 patients.

“Being able to staff vaccination clinics with volunteers from our reserve workforce means that staff at the vaccination sites can continue to perform their normal duties, which is crucial as our hospitalization rate has increased,” said a spokeswoman for Indiana University’s School of Medicine.

‘STRIKE BACK AGAINST COVID’

As the first vaccines arrived, Indiana health officials called on the state university because of its far-reaching campuses. More than 630 of Indiana University’s medical and nursing students have signed up as volunteers and receive 90 minutes of online and hands-on training.

Fourth-year medical student Nicholas Clough began administering COVID-19 vaccines to frontline healthcare workers last Wednesday. He has lost several family members during the pandemic.

“It finally felt like it was a real, tangible strike back against COVID,” said Clough, 26.

The University of Wisconsin is offering a $500 tuition credit to students with medical credentials working at understaffed hospitals during the winter break, including administering vaccines.

The university is also talking to government officials to turn universities into vaccine distribution hubs, a spokesman said.

In California, fire department paramedics have been trained to administer the vaccine, initially to fellow employees.

“They have already received online training and will have another one-hour live training session,” said Peter Sanders, a spokesman for the Los Angeles Fire Department, which expected its first shipment of the Moderna COVID-19 vaccine on Wednesday.

Michigan has set up a volunteer registry allowing officials and hospitals to recruit help for upcoming vaccine clinics.

“We encourage all medical and nursing students to register now so they will be ready when their assistance is needed!” a health department spokeswoman said.

Other states are not actively recruiting nursing students. A spokeswoman for Georgia’s health department said the state might do so later, as the vaccine becomes more widely available to the public.

Depending on state licensing laws, medical and nursing students are allowed to administer vaccines, often under supervision of a fully-licensed professional.

Facing a shortage of vaccinators, the Association of Immunization Managers, a nonprofit representing state and local health officials, recommends relaxing regulation or adjusting licensing requirements.

At least two states, Massachusetts and New York, have changed their laws in recent weeks to expand those who are eligible to give shots.

New York Governor Andrew Cuomo on Dec. 13 allowed medical, nursing, pharmacy, dentistry, podiatric and midwifery students to administer flu and COVID-19 shots under supervision.

(Reporting by Tina Bellon and Melissa Fares in New York; Additional reporting by Deena Beasley in Los Angeles; Editing by Michele Gershberg and Aurora Ellis)

Fed’s Kaplan concerned about next six months as virus surges

By Ann Saphir

(Reuters) – Dallas Federal Reserve President Robert Kaplan said on Tuesday he was “cautious and concerned” about downside economic risks in the short run because of the resurgence of the coronavirus, but more optimistic in the longer term.

“The next two quarters are going to be very challenging, very difficult,” Kaplan told Bloomberg’s Future of Finance virtual conference. “Downside risks are growing with this resurgence.”

Still, he said, the U.S. economy will likely rebound strongly in the second half of next year, after a vaccine is widely available, adding that his business contacts have told him they are gearing up for exactly that.

The United States is experiencing a rise in cases, hospitalizations and deaths from COVID-19, with some state and local governments re-imposing restrictions to slow the spread.

With millions of out-of-work Americans dipping into savings built with government aid distributed earlier this year, Kaplan said, household income and spending will drop off “at some point” unless more fiscal aid is forthcoming.

Aid to small businesses in the form of a renewed Paycheck Protection Program would be particularly helpful, he said, because while financial conditions are broadly fairly loose, that is not the case for smaller businesses that rely on banks for credit.

“While we are in the teeth of the pandemic I believe we need to do what we need to do to fight the pandemic,” Kaplan said in a separate event sponsored by UT Dallas.

As long as the pandemic is ongoing, the U.S. central bank should not back away from its programs supporting economic growth, which include bond purchases totaling $120 billion a month and lending programs to corporate America, he said.

Once it subsides, he said, the U.S. will need to moderate government debt.

(Reporting by Ann Saphir; Editing by Paul Simao and Chizu Nomiyama)

McConnell says U.S. needs ‘another boost’ as coronavirus relief talks continue

By Patricia Zengerle

WASHINGTON (Reuters) – Senate Majority Leader Mitch McConnell on Thursday said the U.S. economy needs an “additional boost” to cope with the fallout of the coronavirus pandemic, as his Democratic counterparts and White House officials try to hash out a next wave of relief.

As talks neared the end of their second week, the four principal negotiators – a group that does not include McConnell – appeared to be near agreement on some topics, but still trillions of dollars apart on major issues including the size of a federal benefit for tens of millions of unemployed workers.

McConnell said he agreed with Federal Reserve Chairman Jerome Powell and Treasury Secretary Steven Mnuchin that agreement is needed on another aid package, even though some of his fellow Republicans in the Senate do not think so.

“I think we need an additional agreement,” the Republican Senate leader told CNBC, adding “the economy does need an additional boost.” Nonpartisan analysts say McConnell’s Republicans face a risk of losing their Senate majority in November’s elections.

McConnell continued to insist that unemployment benefits in any deal should be adjusted downward and that the agreement should include liability protections against lawsuits for reopening businesses during the pandemic.

Mnuchin was due to join fellow Republican Mark Meadows, the White House chief of staff, and the two top congressional Democrats, House of Representatives Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer, for talks on Capitol Hill at 5 p.m. EDT (2100 GMT).

Others not in the negotiation room considered their own actions, as Republican senators said they had been told that no deal by Friday would mean no deal at all.

Republican President Donald Trump stood ready to use executive orders to address issues such as unemployment benefits and protections against evictions if talks failed, according to Meadows.

Republican Senator Marco Rubio told reporters that the Senate on Thursday could also take up a new version of the Payroll Protection Program that provides financial assistance to small businesses in the form of forgivable loans.

Congress passed more than $3 trillion in relief legislation early in the pandemic. But lawmakers missed a deadline last week to extend the $600 per week in enhanced unemployment payments that played a key role in propping up the economy.

Pelosi and Schumer have pushed for a comprehensive package of assistance for the unemployed, the poor, hospitals, schools and state and local governments.

“The leader and I are determined that we will come to agreement. But it has to meet the needs of the American people,” Pelosi said.

Mnuchin has warned that the Trump administration would not accept “anything close” to the $3.4 trillion in new aid sought by Democrats. Senate Republicans have proposed a $1 trillion package that many of their own members have rejected.

Americans on COVID-19 jobless benefits spent more than when working, study shows

By Jonnelle Marte

(Reuters) – Americans who received enhanced unemployment benefits due to the coronavirus pandemic spent more than when they were working, a study released on Thursday said, adding to concerns about a steep fall in spending when the emergency benefits expire.

The $600 weekly supplement added to jobless benefits as part of the CARES Act helped unemployed households spend 10% more after receiving benefits than they did before the pandemic, according to research by the JP Morgan Chase Institute.

Researchers analyzed transactions for 61,000 households that received unemployment benefits between March and May. Spending dropped for all households as the virus spread and led to business shutdowns, but then rose when households began receiving jobless benefits, the study found.

That contrasts with a typical recession, when households receiving unemployment benefits usually cut spending by 7% because regular jobless benefits amount to only a fraction of a person’s prior earnings, the research found.

The analysis highlighted how the additional unemployment benefits are helping to prop up the U.S. economy and consumer spending after the pandemic led to a surge in joblessness across the country.

More than 30 million Americans are estimated to be receiving unemployment benefits – and they could be pushed off an income cliff when the supplemental benefits, which are due to expire at the end of July, are withdrawn.

“Our estimates suggest that expiration will result in large spending cuts, with potentially negative effects on both households and macroeconomic activity,” the researchers wrote.

The data also reflected the financial pain faced by households that encountered big delays in collecting benefits after states across the country were overwhelmed by applications.

Households that had to wait several weeks for their first unemployment check to arrive cut spending by about 20%, the study found. Spending recovered after the checks arrived.

(Reporting by Jonnelle Marte; editing by Richard Pullin)

Fears of second U.S. coronavirus wave rise on worrisome spike in cases, hospitalizations

By Lisa Shumaker, Carl O’Donnell and Michael Erman

(Reuters) – About half a dozen states including Texas and Arizona are grappling with a rising number of coronavirus patients filling hospital beds, fanning concerns that the reopening of the U.S. economy may spark a second wave of infections.

The rally in global stocks came crashing down on Thursday over worries of a pandemic resurgence. The last time the S&P 500 and Dow fell as much in one day was in March, when U.S. coronavirus cases began surging.

A recent spike in cases in about a dozen states partially reflects increased testing. But many of those states are also seeing rising hospitalizations and some are beginning to run short on intensive care unit (ICU) beds.

Texas has seen record hospitalizations for three days in a row, and in North Carolina only 13% of the state’s ICU beds are available due to severe COVID-19 cases. Houston’s mayor said the city was ready to turn its NFL stadium into a make-shift hospital if necessary.

Arizona has seen a record number of hospitalizations at 1,291. The state health director told hospitals this week to activate emergency plans and increase ICU capacity. About three-quarters of the state’s ICU beds are filled, according to the state website.

“You’re really crossing a threshold in Arizona,” said Jared Baeten, an epidemiologist at the University of Washington. “The alarming thing would be if the numbers start to rise in places that have clearly already peaked and are on their downtrend,” he said, referring to New York and other Northeastern states where new cases and deaths have plummeted.

Health experts worry there could be a further rise in infections from nationwide protests over racial injustice and police brutality that packed people together starting two weeks ago.

STATES WITH RISING CASES

Arizona, Utah and New Mexico all posted rises in new cases of 40% or higher for the week ended June 7, compared with the prior seven days, according to a Reuters analysis. New cases rose in Florida, Arkansas, South Carolina and North Carolina by more than 30% in the past week.

Dr. Anthony Fauci, the top U.S. infectious disease official, told Canada’s CBC news that more cases are inevitable as restrictions are lifted.

“We also as a whole have been going down with cases,” Fauci said. “But I think what you mentioned about some states now having an increase in the number of cases makes one pause and be a little bit concerned.”

Even if hospitals are not overwhelmed by coronavirus cases, more hospitalizations mean more deaths in the coming weeks and months, said Spencer Fox, research associate at the University of Texas at Austin.

“We are starting to see very worrying signs about the course the pandemic is taking in cities and states in the U.S. and around the world,” he said. “When you start seeing those signs, you need to act fairly quickly.”

Total U.S. coronavirus deaths are now over 113,000, by far the most in the world. That figure could exceed 200,000 at some point in September, Ashish Jha, the head of Harvard’s Global Health Institute, told CNN.

Jha said the United States was the only major country to reopen without getting its case growth to a controlled level – defined as a rate of people testing positive for the coronavirus remaining at 5% or lower for at least 14 days. Nationally, that figure has been between 4% and 7% in recent weeks, according to a Reuters analysis.

Health officials have stressed that wearing masks in public and keeping physically apart can greatly reduce transmissions, but many states have not required masks.

“I want the reopening to be successful,” Harris County Judge Lina Hidalgo, the top executive for the county that encompasses Houston, told reporters. “But I’m growing increasingly concerned that we may be approaching the precipice of a disaster.”

(Reporting by Michael Erman and Carl O’Donnell in New York and Lisa Shumaker in Chicago; Additional reporting by Lewis Krauskopf in New York and Brad Brooks in Austin, Texas; Writing by Lisa Shumaker; editing by Peter Henderson and Bill Berkrot)

Explainer: What to look for in the Fed’s U.S. economic outlook

By Ann Saphir

SAN FRANCISCO (Reuters) – U.S. Federal Reserve policymakers on Wednesday will publish their first economic projections since the coronavirus pandemic set off a recession in February, estimates expected to signal a collapse in output this year and near-zero interest rates for the next few years.

They’ll also give shape to the range of views at the U.S. central bank about the expected speed of the recovery and any longer-term damage to the world’s biggest economy from a pandemic that has so far killed nearly 111,000 Americans and prompted unprecedented restrictions on commerce and movement to slow its spread.

Here is a guide to what the projections may show and what questions they may raise about the future of the U.S. economy as authorities lift those restrictions.

WHAT ARE THEY?

Every three months, each of the Fed’s 17 policymakers develops a set of multi-year forecasts for U.S. unemployment, inflation, economic growth and interest rates. The projections are published in summary form at the end of the policy-setting meeting. The Fed did not release a quarterly summary of economic projections in March, however, because of massive uncertainty about the spread of the novel coronavirus, the resulting lockdowns, and the economic fallout. Though plenty is still uncertain, one thing is clear: the projections on Wednesday will be starkly worse than the Fed’s largely favorable outlook in December. (Please see graphic )

DOES THIS HAVE ALL THOSE DOTS?

Yes. The projections’ centerpiece is the so-called dot plot, a graphic representation of where each unnamed policymaker sees interest rates in coming years. This collection of rate-setters’ individual views has also occasionally functioned as a loose policy promise about the path of rates. This is one of those times. The Fed has signaled it will keep its key overnight lending rate near zero until the recovery is well underway. The dots, which will likely show most Fed policymakers expect no change in rates through 2022, “could be seen as a soft way of reinforcing that guidance,” said Michael Feroli, chief U.S. economist at JP Morgan.

HOW DEEP, HOW LONG?

With states in various stages of reopening after weeks or more of stay-at-home orders that precipitated the recession, the Fed policymakers’ forecasts will map their sense of how quick the recovery will be.

“The Fed likely forecasts a strong rebound in growth in H2, but the level of GDP will remain well below the pre-coronavirus level until late 2021” Oxford Economics’ Kathy Bostjancic wrote. Her view was widely echoed by other economists.

The U.S. unemployment rate, which fell unexpectedly to 13.3% in May, may be projected to end this year in double digits and remaining well above healthy long-run levels next year. The Fed will likely project inflation to undershoot its 2% target for the foreseeable future, Bostjancic and others say.

Importantly, the Fed’s summary of projections reflects what policymakers see as the most likely path for the economy, which for many does not factor in a second wave of infections – a key unknown for now.

But deaths from COVID-19, the respiratory illness caused by the novel coronavirus, continue to increase in many U.S. states, and public health officials have flagged the possibility of further spread after crowded Memorial Day celebrations in parts of the country in late May and ongoing mass protests against racial inequalities since the May 25 death of George Floyd, a black man, in police custody in Minneapolis.

“The risk to our forecast, and likely the Fed’s, is skewed to the downside,” Bostjancic said.

LONG-TERM DAMAGE?

The economic projections being released on Wednesday will also offer insight into whether Fed officials see the pandemic as inflicting permanent damage on the economy. Nomura economist Lewis Alexander projects little change to the Fed’s earlier estimate that the economy can sustain about 1.9% yearly growth in the long run, along with 4.1% unemployment, though both could erode. More broadly, he said, “it is important to emphasize the significant amount of uncertainty” around the forecasts.

(Reporting by Ann Saphir; Editing by Dan Burns and Paul Simao)

Scarred and scared: post-Covid consumers not their old selves

By Mark John

LONDON (Reuters) – Michael Clark of Amy’s Housewares has one big fear as its London stores prepare to reopen on June 15 along with other retailers around Britain: “Customers not spending, having no trust in the economy.”

His concern, captured in a survey by the British Independent Retailers Association (BIRA) before a nationwide easing of social distancing measures, may be well-founded.

Across the world, consumers are emerging from lockdowns warier and more thrift-conscious than before. That will drag on any recovery and could encourage governments and central bankers to follow up on coronavirus handouts with more costly stimulus.

The new thrift is showing up in various ways: some households are hoarding the cash they saved during lockdowns; some are flocking to cheaper brands or sticking with essentials.

GRAPHIC: Savings rates in Europe rise Savings rates in Europe rise – https://graphics.reuters.com/ECONOMY-EU/SAVINGS/yxmvjkqlnpr/chart.png

Other risks to consumer demand include the outright collapse of purchasing power among those whose livelihoods were ruined by the pandemic and even imponderables such as what happens to spending patterns if more people continue to work from home.

In China, shopping malls began to fill up again from April after lockdown eased. Online sales have surged in some categories, often helped by discounts and state coupons.

But a lingering wariness about items deemed non-essential means consumers may still not emerge as the pillar of growth which Beijing hopes they will be.

“Consumers are placing a greater focus on essential spending categories,” Fitch Solutions said in a June 4 report, predicting a fall in Chinese household spending this year and slashing its 2020 growth forecast to just 1.1% from 5.6% before the pandemic.

DOLLAR STORE CLIENTELE GROWS

In the United States, commonplace brands such as chocolate giant Hershey or toothpaste-maker Colgate say consumers have traded down. Dollar stores, meanwhile, expect to open their doors to a new set of customers as they did after the 2008-09 Great Recession.

“In 2008, folks lost jobs … and they found us. And I think that’s some of what we’re planning for as we take a look into our crystal ball at back half of the year and 2021,” Dollar Tree Chief Executive Gary Philbin said on May 28.

Much hangs now on what happens to the mountain of savings built up by those U.S. households which weathered the worst of the lockdown fall-out and have pushed the overall U.S. savings rate to a record 33% of income.

GRAPHIC: Savings rates in the U.S. rise – https://graphics.reuters.com/ECONOMY-USA/SAVINGS/nmovakbjdva/chart.png

While that rate will fall, those who expect cash to flood back into the economy may be disappointed. A 2012 paper by IMF researchers found that lingering uncertainty after the onset of the 2008-09 recession boosted saving rates durably, leading to lower consumption and growth in the wider economy.

Moreover many U.S. households are about to suffer “income cliffs” with one-off tax rebates expiring in May and pandemic unemployment compensation ending in July, Oxford Economics said, forecasting lower household income through the rest of the year.

“This will likely act as a constraint on the consumer spending recovery well into 2021,” it said in a June 3 note.

Such a scenario could force policy makers across the world to encourage savers to spend by speeding up moves to ease lockdowns, offering more economic support or pushing interest rates further towards, and even into, negative territory.

The same dilemma exists in Europe. The European Central Bank expects household savings to rise six points to 19% of income this year and remain high next year due to what economists call “scarring”, when an event leaves a durable impact on behaviour.

Citing the risk of cash-hoarding, French Finance Minister Bruno Le Maire has called for direct incentives to boost demand. The budget he will present next week will forecast a drop in consumer spending of 10% this year as households amass savings.

Germany has announced a cut in valued-added tax for the second half of the year to drive consumption, coupling that with cash handouts to parents.

Presenting hefty downgrades of the bank’s eurozone growth protections on Thursday, ECB President Christine Lagarde said the depth of scarring of domestic demand was one big factor that will determine the size of the contraction and recovery to come.

She warned: “Overall, the (ECB) Governing Council sees the balance of risks … to the downside.”

(Additional reporting by Reuters bureaux; editing by Philippa Fletcher)

Exclusive: Internal Chinese report warns Beijing faces Tiananmen-like global backlash over virus

BEIJING (Reuters) – An internal Chinese report warns that Beijing faces a rising wave of hostility in the wake of the coronavirus outbreak that could tip relations with the United States into confrontation, people familiar with the paper told Reuters.

The report, presented early last month by the Ministry of State Security to top Beijing leaders including President Xi Jinping, concluded that global anti-China sentiment is at its highest since the 1989 Tiananmen Square crackdown, the sources said.

As a result, Beijing faces a wave of anti-China sentiment led by the United States in the aftermath of the pandemic and needs to be prepared in a worst-case scenario for armed confrontation between the two global powers, according to people familiar with the report’s content, who declined to be identified given the sensitivity of the matter.

The report was drawn up by the China Institutes of Contemporary International Relations (CICIR), a think tank affiliated with the Ministry of State Security, China’s top intelligence body.

Reuters has not seen the briefing paper, but it was described by people who had direct knowledge of its findings.

“I don’t have relevant information,” the Chinese foreign ministry spokesperson’s office said in a statement responding to questions from Reuters on the report.

China’s Ministry of State Security has no public contact details and could not be reached for comment.

CICIR, an influential think tank that until 1980 was within the Ministry of State Security and advises the Chinese government on foreign and security policy, did not reply to a request for comment.

Reuters couldn’t determine to what extent the stark assessment described in the paper reflects positions held by China’s state leaders, and to what extent, if at all, it would influence policy. But the presentation of the report shows how seriously Beijing takes the threat of a building backlash that could threaten what China sees as its strategic investments overseas and its view of its security standing.

Relations between China and the United States are widely seen to be at their worst point in decades, with deepening mistrust and friction points from U.S. allegations of unfair trade and technology practices to disputes over Hong Kong, Taiwan and contested territories in the South China Sea.

In recent days, U.S. President Donald Trump, facing a more difficult re-election campaign as the coronavirus has claimed tens of thousands of American lives and ravaged the U.S. economy, has been ramping up his criticism of Beijing and threatening new tariffs on China. His administration, meanwhile, is considering retaliatory measures against China over the outbreak, officials said.

It is widely believed in Beijing that the United States wants to contain a rising China, which has become more assertive globally as its economy has grown.

The paper concluded that Washington views China’s rise as an economic and national security threat and a challenge to Western democracies, the people said. The report also said the United States was aiming to undercut the ruling Communist Party by undermining public confidence.

Chinese officials had a “special responsibility” to inform their people and the world of the threat posed by the coronavirus “since they were the first to learn of it,” U.S. State Department spokeswoman Morgan Ortagus said in response to questions from Reuters.

Without directly addressing the assessment made in the Chinese report, Ortagus added: “Beijing’s efforts to silence scientists, journalists, and citizens and spread disinformation exacerbated the dangers of this health crisis.”

A spokesman for the U.S. National Security Council declined to comment.

REPERCUSSIONS

The report described to Reuters warned that anti-China sentiment sparked by the coronavirus could fuel resistance to China’s Belt and Road infrastructure investment projects, and that Washington could step up financial and military support for regional allies, making the security situation in Asia more volatile.

Three decades ago, in the aftermath of Tiananmen, the United States and many Western governments imposed sanctions against China including banning or restricting arms sales and technology transfers.

China is far more powerful nowadays.

Xi has revamped China’s military strategy to create a fighting force equipped to win modern wars. He is expanding China’s air and naval reach in a challenge to more than 70 years of U.S. military dominance in Asia.

In its statement, China’s foreign ministry called for cooperation, saying, “the sound and steady development of China-U.S. relations” serve the interests of both countries and the international community.

It added: “any words or actions that engage in political manipulation or stigmatization under the pretext of the pandemic, including taking the opportunity to sow discord between countries, are not conducive to international cooperation against the pandemic.”

COLD WAR ECHOES

One of those with knowledge of the report said it was regarded by some in the Chinese intelligence community as China’s version of the “Novikov Telegram”, a 1946 dispatch by the Soviet ambassador to Washington, Nikolai Novikov, that stressed the dangers of U.S. economic and military ambition in the wake of World War Two.

Novikov’s missive was a response to U.S. diplomat George Kennan’s “Long Telegram” from Moscow that said the Soviet Union did not see the possibility for peaceful coexistence with the West, and that containment was the best long-term strategy.

The two documents helped set the stage for the strategic thinking that defined both sides of the Cold War.

China has been accused by the United States of suppressing early information on the virus, which was first detected in the central city of Wuhan, and downplaying its risks.

Beijing has repeatedly denied that it covered up the extent or severity of the virus outbreak.

China has managed to contain domestic spread of the virus and has been trying to assert a leading role in the global battle against COVID-19. That has included a propaganda push around its donations and sale of medical supplies to the United States and other countries and sharing of expertise.

But China faces a growing backlash from critics who have called to hold Beijing accountable for its role in the pandemic.

Trump has said he will cut off funding for the World Health Organization (WHO), which he called “very China-centric,” something WHO officials have denied.

Australia’s government has called for an international investigation into the origins and spread of the virus.

Last month, France summoned China’s ambassador to protest a publication on the website of China’s embassy that criticized Western handling of coronavirus.

The virus has so far infected more than 3 million people globally and caused more than 200,000 deaths, according to a Reuters tally.

(Editing by Peter Hirschberg)

Florida to unveil reopening plan as data shows painful contraction of U.S. economy

By Maria Caspani and Doina Chiacu

WASHINGTON (Reuters) – Florida Governor Ron DeSantis on Wednesday was preparing to unveil his plan for loosening restrictions on business activity in one of the most populous states in the United States as data showed the economy contracted 4.8% in the first three months due to the shutdowns aimed at battling the coronavirus.

Commerce Department data showed the economy shrank at its sharpest pace since the Great Recession due to the stringent measures to slow the spread of the novel coronavirus, ending the longest expansion in U.S. history.

Economists generally define a recession as at least two months of negative growth in a row.

“The economy is in free fall, we could be approaching something much worse than a deep recession,” said Sung Won Sohn, a business economics professor at Loyola Marymount University in Los Angeles. “It’s premature to talk about a recovery at this moment, we are going to be seeing a lot of bankruptcies for small and medium sized businesses.”

With millions unemployed, about a dozen states have been forging ahead to restart shuttered commerce without being ready to put in place the large-scale virus testing or means to trace close contacts of newly infected individuals.

Public health experts have urged caution, saying that a premature rollback of social-distancing policies could trigger a resurgence of infections.

In Florida, the largest state so far to contemplate re-opening, DeSantis is expected to announce a “phase one” loosening of restrictions a day after it reported a record-high 83 deaths and more than 700 new infections from the previous 24 hours on Tuesday. Despite being spared the worst of the pandemic, the state has so far tallied 32,846 cases of COVID-19, the disease caused by the virus, including 1,171 deaths.

U.S. deaths from the novel coronavirus was approaching 60,000 on Wednesday, and cases crossed the 1 million mark. The death toll has already surpassed the number of American lives lost in the Vietnam War, and the outbreak will soon be deadlier than any flu season since 1967, according to a Reuters tally.

White House adviser Jared Kushner, President Donald Trump’s son in law, said on Wednesday that May would likely become a transition month as states begin reopening in phases.

“I think you’ll see by June, a lot of the country should be back to normal and the hope is is that by July, the country is really rocking again,” he told Fox News.

He said the White House would begin another round of calls on Wednesday with all the governors to ask what additional supplies they need and what their two-month plan is.

Some businesses in Tennessee were allowed to reopen on Wednesday following an executive order issued by Governor Bill Lee to restart the state’s economy.

Some restaurants will be able to serve food to customers seated at tables, granted they observe state-mandated guidelines, while close-contact personal service businesses like barber shops, salons and spas will remain closed for now.

In California, Governor Gavin Newsom said curbside retail, manufacturing and other “lower-risk workplaces” should reopen within weeks as testing and contact-tracing improve.

Health experts have stressed the importance of testing and contact tracing to prevent a resurgence of the virus, but a nationwide strategy remains elusive and Trump has said the testing onus rests with single states.

 

(Reporting by Maria Caspani, Editing by Sonya Hepinstall)