Consumer Confidence Falls
Before the pandemic, consumer confidence hit its highest levels since early 2000. With the onset of the pandemic and recession, consumer confidence dipped immediately and then started rising again through June. However, with the stimulus gridlock, consumer confidence hit a new low with a 84.8 reading compared to a 85.7 reading in April. Americans are the most pessimistic they have been about the future currently. Now that COVID19 cases are starting to decline in the US again, we’ll see if this improves in the coming weeks!
Currently, Democrats and Republicans are still in a stalemate over a new stimulus bill to keep the economy afloat. In the meantime, the President has authorized $300 a week in additional unemployment (or $400, for states that are willing to pay an additional $100 per week to individuals claiming unemployment). Democrats have made it clear that they are not budging on the size of stimulus. Currently, Democrats are demanding $2.2 Trillion in stimulus to support average Americans through this crisis. In the meantime, the additional $300 a week in unemployment insurance should help restore some confidence in the economy again.
With the decrease in weekly unemployment benefit, consumer spending will likely decline by 12-20% in the short term. However, this is better than the 44% drop in spending that a paper from the National Bureau of Economic Research projected if the additional weekly unemployment benefit was eliminated completely at this point.
COVID19 Winter Worries
While COVID19 cases are coming back in control, there are a few states actually seeing increases like Iowa and Alabama. Moreover, there is another big concern. With winter approaching, there is a lot of uncertainty on the potential for a new COVID19 outbreak combined with flu season. That would throw a big wrench in the economic recovery. However, in the meantime, a search for a vaccine continues. This past weekend, Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, said that we may know we have a safe and effective vaccine by November or December. Let’s keep our fingers crossed!
The economic recovery since the pandemic started in March 2020 has been impressive all things considered. However, the economic recovery is certainly fragile due to stimulus stalling and the potential for a winter outbreak. For now, we’re keeping a close eye on the recovery and rooting for the world!