German economy in recession as coronavirus hits – as it happened
Rolling live coverage of business, economics and financial markets as data show the economic toll from the pandemic
- Record fall in US retail sales amid coronavirus lockdown
- German economy shrinks by 2.2%; Eurozone GDP down by 3.8%
- Brexit talks stutter to a close with little progress'
- Coronavirus - latest updates
- See all our coronavirus coverage
3.08pm BST
Almost anyone in any country around the world could tell you that economies are in recession: the question is, how deep?
For Germany the technical marker of recession - two consecutive quarters of declining growth - came earlier than expected, with the news that the fourth quarter of 2019 saw output fall, before the steep decline seen in the first three months of 2020 and the deeper losses expected in the current quarter.
Related: Coronavirus US live: House to vote on $3tn stimulus package opposed by Trump and Senate
2.54pm BST
And more on airlines: this time, Virgin Atlantic.
2.33pm BST
Wall Street stocks have dropped at the opening bell.
Here are the opening moves:
2.31pm BST
More bad (if expected) news on the US economy: industrial output fell 11.2% in April compared to March.
2.25pm BST
Some updates on the embattled aviation sector.
We have invited Boeing to discuss compensation. It's compensation for the grounded Max... there is also compensation for delayed delivery of the Max that was supposed to come and loss of revenue.
By the end of June, which is the end of our fiscal year, we should have something... meaning compensation.
1.57pm BST
US stock market futures have taken a tumble ahead of the opening bell on Wall Street today - and they were not helped by the worse than expected US retail sales.
The S&P 500, the Dow Jones industrial average and the Nasdaq are all set for declines of about 1%.
1.49pm BST
Economists had expected a 12% decline in US retail sales, so a huge fall was priced in. However, the fact that it was so far off estimates shows the extent of the turmoil in the US economy.
The data also show a big redistribution of spending underlying the overall decline.
1.37pm BST
US retail sales plunged by 16.4% in April compared to March as lockdown restrictions bit, according to the US Census Bureau - the fastest rate on record.
WOW! US Retail Sales fell by 16.4% in April, the most on record and far worse than expected. Cumulative decline in retail sales in March-April 22%! pic.twitter.com/u8kMdhNvDY
1.32pm BST
Barnier is still talking. Via Reuters, he has said that an agreement is still possible but that the EU is ready for no deal" and will be stepping up preparations.
Before the pandemic a no-deal end to the Brexit transition period was seen as one of the biggest risks to their prospects by many British businesses.
1.27pm BST
Sterling has fallen by 0.6% today against the US dollar, hitting its lowest level since 27 March, with traders blaming the Brexit impasse. One pound bought you $1.2155 at its lowest.
The EU's chief negotiator, Michel Barnier, has added his tuppence, following his counterpart, and it's fiery stuff:
We will not bargain away our values for the benefit of the British economy.
12.58pm BST
Some of the earlier enthusiasm among European investors has tailed off, with market gains diminishing. Some indices are now in the red:
12.51pm BST
Brexit.. remember that? Round 3 of negotiations with the EU have ended with very little progress" towards an agreement according to David Frost, the UK's chief negotiator.
12.17pm BST
The eurozone economy will shrink by 8.1% this year, before bouncing back with 6.5% growth in 2021, according to forecasts from economists at HSBC.
They expect policymakers at the European Central Bank, led by Christine Lagarde, to extend its emergency Covid-19 package by 500bn at their 4 June meeting. In March, the ECB announced a 750bn asset purchase programme (known as PEPP), targeting both public- and private-sector assets.
In the face of ballooning public finance deficits and the ever-present threat of market pressure on fiscally-weaker countries, the ECB remains the main game in town for preventing debt crises that could threaten the stability of the euro. At the ECB's recent purchase rate, it will have exhausted the 750bn PEPP by end-September. Significant PEPP expansion could help allay market concerns for now, even if it isn't a lasting solution.
Although we now expect a slower rebound [in eurozone growth in 2021], it is still very swift by historical standards. This reflects the unusual composition of the recession. Typically, household spending holds up relative to investment through a slump as firms slash capex. This time, we expect a double-digit drop in consumption and a sharp spike in savings. But as lockdowns are eased, consumer spending could rise rapidly - provided the furloughing measures, fiscal cushions and central bank lending schemes work.
Related: ECB asset purchase programme boosts Euro
11.42am BST
Investors have welcomed the news that Rico Back is no longer running Royal Mail, with shares up 8% this morning at 175p.
The company said he was leaving immediately, less than two years after being appointed chief executive, as it announced a 22m drop in revenues in April, mainly due to a sharp drop in letter volumes which were down by a third.
The middle of a global crisis feels like an odd time to part ways with a CEO, particularly one who has been in post for as short a time as Royal Mail's Rico Back.
With his P45 delivered, Back is being given more time to enjoy the Swiss penthouse from which he has reportedly been running the company.
Related: Royal Mail chief quits with immediate effect
11.10am BST
Other UK companies at risk of falling into S&P's fallen angel" category (when a debt issuer's rating is cut to junk from investment grade) this year include:
The financials sector led the additions to the potential fallen angels list [for 2020], highlighting the challenges the sector is facing.
However, we see the highest downgrade potential in the lodging and leisure and auto sectors, which have the greatest number of potential fallen angels that have ratings on CreditWatch negative.
10.49am BST
In other news, the number of companies or countries at risk of having their credit ratings cut to junk from investment grade has been pushed to a record high of 111 by the coronavirus pandemic, according to research by S&P global ratings research.
The number of so-called fallen angels' has so far this year reached 24, with more than $300bn in rated debt, S&P estimates. The 111 potential fallen angels have another $444 billion of bonds, suggesting the amount is likely to spiral further.
Potential fallen angels are significant because the loss of investment-grade ratings typically carries both higher capital costs and sometimes the need to revise contracts with bondholders to protect investors - further adding to capital costs - or worse, could lead to the sale of the bonds in favour of more creditworthy companies.
10.34am BST
BREAKING
1) The Eurozone is confirmed to have suffered its biggest ever fall in GDP in first quarter.
The -3.8% decline is almost twice as big as UK contraction and three times that of the US. pic.twitter.com/NVAGaT69HW
10.14am BST
Unlike Germany, the eurozone as a whole is not yet in recession. The good news ends there.
It is the steepest quarterly downturn since before the euro was created, and since comparable data was first collected in 1995, according to Eurostat, the European commission's statistics office.
10.03am BST
Eruzone GDP fell by 3.8% quarter-on-quarter in the euro zone in the first quarter of 2020, according to a flash estimate from the EU's statistics agency released on Friday.
9.43am BST
Germany is in recession, and worse is coming, said Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics:
The German economy has been tip-toeing on the edge of recession since the beginning of 2019, but it can hide no longer. The revision to Q4 means that the economy entered a technical recession at the start of the year, and this before the incoming collapse in Q2 activity.
Q2 will be orders of magnitudes worse, though we suspect the German economy will continue to outperform" its EZ peers. In addition, employment was hardly affected by the Covid-19 epidemic in Q1, rising by 0.3% year-over-year in Q1. This is consistent with the fact that the labour market is a lagging indicator.
But it also reflects the fact that the jump in the use of the short-time work scheme, Kurzarbeit, means that workers remain employed, even if they are, strictly speaking, furloughed.
[The release] confirms that the government's less stringent virus containment measures mean that the economy is not faring as badly as the other major euro-zone countries. That said, the crisis is still taking a heavy toll.
For comparison, the declines in GDP in France and Italy were much deeper, at 5.8% and 4.7% respectively. This will have been partly because strict social distancing measures were not introduced in Germany until 22nd March, compared to 10th March in Italy for example. But the lockdown was also less stringent, which allowed the construction sector, for example, to record an expansion of 1.8% m/m in March. That compares to a 40.2% m/m drop in construction in France.
Further ahead, we have pencilled in a much bigger decline in German GDP in Q2 of about 10% q/q. The lockdown is being eased in May and June, but only gradually, and Germany's recovery will be constrained by the problems elsewhere in Europe.
9.37am BST
German GDP in the first quarter was 2.3% lower than the same quarter in 2019, also the biggest annual drop since the financial crisis.
It was a 7.9% year-on-year drop then, which is widely expected to be beaten in the second quarter.
9.29am BST
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.
Germany finally enters that recession everyone knew it was in anyway.
9.23am BST
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
9.13am BST
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%).
9.06am BST
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.
More details shortly.
8.55am BST
Royal Mail chief executive Rico Back has stepped down with immediate effect, it announced on Friday morning.
8.34am BST
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.
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.
8.20am BST
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.
Related: Regular gamblers up the stakes during UK lockdown
8.05am BST
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.
7.54am BST
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.
7.45am BST
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.
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
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."
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.
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