FRANKFURT, GERMANY – 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 U.S. 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, the U.S. is still by far the biggest economy — accounting for 22% of total economic output, vs. 14% for No. 2 China, according to the World Bank.
That makes its handling of the pandemic and its economy critical for companies like Officina del Poggio, a producer of luxury handbags in Bologna, Italy, that sells 60% its vintage motorcycle-inspired satchels to U.S. 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 got some orders by trying to find consumers directly through newsletters and social media, but remains cautious about the future, as she sees the U.S. market for her goods continuing 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 U.S. 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 U.S. 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 U.S. won't be the locomotive," said Nariman Behravesh, chief economist at IHS Markit.
The European Union, which has reduced the number of contagions more effectively than the U.S., 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.