Daily Times

People in China are back to buying German luxury cars. Europe’s assembly lines are accelerating. Now the global economy is waiting for the United States to get its coronavirus outbreak under control and boost the recovery, but there’s little sign of that.

The United States´ fumbling response to the pandemic and its dithering over a new aid package is casting doubt on its economic prospects and making it one of the chief risks to a global rebound.

After springtime restrictions, many US states prematurely declared victory over the virus and began to reopen their economies, leading to a resurgence in COVID-19 cases. Confirmed infections are rising in most states, and many businesses have had to scale back or even cancel plans to reopen. And while it does not dominate global commerce like it did 20 years ago, America is still by far the biggest economy – accounting for 22% of total economic output, versus 14% for No. 2 China, according to the World Bank.

That makes its handling of the pandemic and its economy crucial for companies like Officina del Poggio, a producer of luxury handbags in Bologna, Italy, that sells 60% its vintage motorcycle-inspired satchels to US customers.

Company owner Allison Hoeltzel Savini said retail sales dried up during the spring. She had already suffered a blow when Barneys, her main client, went bankrupt and didn’t pay for the spring-summer collection that had shipped. Hoeltzel Savini said she has had to hold off on new hires, and hasn´t been able to do her usual sales trip to the United States. She recouped some sales by reaching out directly to customers through newsletters and social media during the height of Italy´s lockdown, but remains cautious about the future, as the US market for her goods continues to slow down.

“I am really concerned for the next season, if wholesale clients will be placing orders,´´ she said.

Same for of Shenzhen Aung Crown Industrial Ltd., which makes baseball hats. The company usually sells about 60% of its output to the United States. “We can´t afford to lose the US market,” said general manager Kailyn Weng. “It is difficult to find other markets that could digest such a great amount of high-quality hats … We have no alternative but to focus on the US market.”

The United States is unlikely to pull the world economy out of its rut as it did in past downturns such as after the Asian financial crisis of the late 1990s.

“The US won´t be the locomotive,´´ said Nariman Behravesh, chief economist at research firm IHS Markit.

The American economy shrank at an annual pace of 32.9% from April through June, by far the worst quarter on record. The numbers are expected to bounce back strongly in the second half but to leave the US economy well short of where it stood at the beginning of 2020.

Talks in Congress to pass another round of federal coronavirus aid have failed, piling pressure on state and local authorities to keep basic services running. US stock markets are nevertheless near record highs, but analysts attribute that largely to the Federal Reserve’s commitment to keep interest rates low. The European Union, which has reduced the number of contagions more effectively than the US, saw its economy shrink at a similar pace but is forecast to grow more quickly next year. And government support for workers has contained the rise in unemployment for now. China, meanwhile, was the first major economy to resume growth since the pandemic struck, recording a 3.2% expansion during the April-June period from the quarter before.

If the U.S had done a better job managing the outbreak, “the rebound would have been stronger,” Behravesh said. “There´s no doubt in my mind about that.´´

Hopes for a strong and quick recovery have largely been dashed by the country´s inability to bring the virus under control. The United States´ diminished ability to drive global growth isn´t just related to its coronavirus response. Its share of global economic output – and growth – has been eroding.