Crawling to the finish line
Consumer spending fell in November, which is the first decline in this economic data point since April. Consumer spending fell 0.4% and personal incomes decreased 1.1%, indicative of the pandemic-related relief winding down. Inflation, as measured by the Fed’s preferred PCE index, was flat for the month. The core PCE index, which excludes food and energy, was only 1.4% higher on an annual basis, well below the Fed’s 2% inflation target.
Moral of the story: Consumption accounts for the majority of the US economy and what we’ve seen so far is telling us that the economy basically crawled to the finish line of 2020 (same, I was in bed and barely stayed awake until midnight).
It finally happened
Lawmakers finally got another stimulus package passed, which includes $900b in COVID-19 relief funds. The legislation authorized $600 stimulus checks for adults with incomes below $75k (and $600 for each dependent). Federal unemployment benefits will be $300 per week and the eligibility period will be 50 weeks (versus typically 26 weeks), and these unemployment benefits will last through March 14. The bill provides $25b in rental assistance, $10b in grants for child-care providers, $82b for schools and colleges, $22b for testing and tracing programs, $32b for vaccine distribution, and significant funding for small businesses and industries most impacted by the pandemic (entertainment venues, airlines, etc.).
Moral of the story: Given vaccine distribution has already started, this relief bill should provide some measure of a stop-gap solution to get the economy to the other side. The House recently passed (with Trump’s support…?) a measure to increase the individual payments from $600 to $2k but it was rejected by the Republican-controlled Senate. Regardless, I’m relieved we didn’t fall off the cliff that was expiring unemployment benefits.
Four years later…
This has literally been the longest saga of all time, but we’re finally getting to the other side of Brexit. Britain officially left the European Union last January after 47 years and was going through a transition period that expired this week. This new era finally comes four years after the British voters elected to leave the EU in the summer of 2016. Britain and the EU came to an agreement on a trade deal on Thursday that seems fair and balanced. The agreement should minimize economic disruption and lead to constructive economic and political relations.
Moral of the story: The final outcome of Brexit has been an overhang for the markets for four years. The uncertainty faced by many companies operating in Britain and the EU seems to finally be ending, which is a welcome change of pace.