The headline decline in Q2 GDP growth only touches the surface of what economic growth to expect this fall and winter. The drop of minus -32.9 percent was inevitable with the pandemic lockdowns, but not the severity of any recovery.
Q2 plunged this much because consumer spending plunged -35 percent during this period. And since consumers power some 70 percent of economic activity—i.e., GDP growth—it will only recover when consumers feel safe enough venture out of their rabbit holes.
And when can that happen with new record COVID-19 death rates in California, Idaho, Florida, N. Carolina, Texas and Arizona? The infection and death rate curves are still rising, rather than even plateauing.
As NY Times columnist and pandemic authority Don McNeil, Jr. put it today, “One or several vaccines may be available by year’s end…But by then the virus may have in its grip virtually every village and city on the globe.”
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, as I said yesterday.
That is why consumer confidence fell to 92.6 this month from a revised 98.3 in June, the Conference Board said Tuesday, which is a major indicator of future consumer behavior.
Initial jobless claims also rose last week to 1.43 million, when it should be declining. Continuing claims of those receiving benefits for more than one week now total 17 million. It is not a good sign for any fall or winter revival.
The saddest fact of this pandemic is that science doesn’t lie, but politicians do about the efficacy of mask-wearing and social-isolation, in particular. Why would they? Even asking the question flies in the face of common sense. Infected populations with such a highly transmittable disease facing possible death or even lifelong debilitation from COVID-19, will not be in any hurry to resume normal activities.
It’s as simple as that.
Harlan Green © 2020
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