Popular Economics Weekly
There are a number of reasons that consumers are becoming more fearful after that initial boost of spending with the spring holidays. It’s not only the prospect of a COVID-19 resurgence in the fall when we are still in the first surge, but the added oncoming flu season.
And so consumers will not be happy, but begin to hunker down again, even without new stay-in-home mandates. It’s just too dangerous out there when there’s not even a national mandate to wear masks, much less keeping safe distances, or getting quick testing results, and they will spend less, thus slowing the economic recovery.
So the index of consumer confidence fell to 92.6 this month from a revised 98.3 in June, the Conference Board said Tuesday.
“Consumer Confidence declined in July following a large gain in June,” said Lynn Franco, Senior Director of Economic Indicators at The Conference Board. “The Present Situation Index improved, but the Expectations Index retreated. Large declines were experienced in Michigan, Florida, Texas and California, no doubt a result of the resurgence of COVID-19.”
Consumer spending soared in June with Retail Sales up 6.4 percent in June, whereas it shrank a negative -12.4 percent in April during the shutdown.
What do we expect with the “Whac-A-Mole” recovery I’ve been talking about? No sooner than it being ‘whacked’ down in some states, the virus pops up in others. Trump’s conflicting comments say it all in this Invictus graph—as he rides the infection curve higher.
The first second quarter GDP growth estimate comes out July 30, and look for as much as a minus -30 percent drop, after Q1’s -5 percent decline. So activity in the July-September quarter will tell us if we recover quickly, or not.
Dr. Fauci just sent out new warnings today that infection rates are rising in more states—Kentucky, Tennessee, Ohio and Indiana—and they need to “get ahead of the curves”, or they will experience the soaring infections rates in many southern states, as well as California and Arizona.
Fed Chairman Powell ended the FOMC meeting with the not surprising announcement that the rising infection rates are slowing growth.
“On balance, it looks like the data are pointing to a slowing in the pace of the recovery,” he said. He gave as evidence that hotel vacancy rates have flattened out, and Americans are not going to restaurants, gas stations as much as they had earlier in the summer.
All in all, we should know something in the July unemployment report, after the May and June reports showed 7.5 million had returned to work. But that leaves at least 13 million still out of work due to the shutdowns, and the service industries will be the slowest to recover—hotels, travel, restaurants, and the like—that employ all the low-wage earners hurt most by this pandemic.
Harlan Green © 2020
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