Soundtrack 2 my life
Consumer spending increased 8.2% for May, which is the first increase in consumer spending since COVID-19 made its appearance. Even though an 8% increase is good, it falls about 2% short of economists’ expectations. Many retailers are dropping prices to bring in sales volume, which has caused inflation to fall to 1%, well below the Fed’s 2% target. While spending increased meaningfully, incomes are under pressure and fell 4.2% last month given the continued job losses we’ve been seeing (another 1.5m new jobless claims were filed last week).
Moral of the story: The end of government stimulus and the resurgence in COVID-19 cases are probably going to cap any more meaningful gains on this front. Given it’s an election year, I’d assume Washington will continue to pump money into the economy through additional relief packages, but I’m still skeptical about a pronounced recovery before a vaccine is broadly administered because we’ve got 99 problems, and they’re all COVID-19.
Pursuit of happiness
The International Monetary Fund cut its forecast for global economic growth in 2020…again. They reduced growth estimates to a 4.9% contraction (2% lower than their initial estimates) because the impact of COVID-19 was worse than expected and the recovery isn’t happening as quickly as initially forecast. To put this into context, if these estimates turn out to be correct, this will be the worst global economic downturn since the 1930s. In the US, they are calling for an 8% contraction in economic growth this year.
Moral of the story: About $10.7 trillion in stimulus programs have been announced around the world. Given what we know of programs in the US, about a third of that stimulus spend coming from the US government alone. While this is an inconceivable amount of money (I actually don’t know how to imagine 10.7 trillion $1 bills) being pumped into the economy, it’s unfortunately not enough.
Up, Up, and Away
I’m dreaming of the joy of being at a great college football game this fall but the chances of that happening are about as nonexistent as my summer tan. Anyway, you know how you start the wave in one section and then it travels across the stadium? That’s about how COVID-19 seems to be making its way around the country. The northeast got slammed and took the appropriate measures to shut down (and remain as such) but that wave never really hit the southeast in quite the same way, until now. With US daily case counts getting higher than Kid Cudi, the stock market is getting some of the wind taken out of its sails as several states are either pausing their reopening plans or even rolling them back.
Moral of the story: Wear a mask. Be better.