This Week's State Of The Economy - What Is Ahead? - 30 October 2020

By: Taro Chellaram /Wells Fargo Economics & Financial Report/Oct 27, 2020

This Week's State Of The Economy - What Is Ahead? - 30 October 2020

U.S. - GDP Bounces Partway Back in Q3

  • Real GDP jumped a record 33.1% during Q3, beating expectations. A 40.7% surge in consumer spending drove the gain. However, real GDP is still 3.5% below pre-pandemic levels.
  • Initial jobless claims dropped to 751k for the week ending October 24, the lowest level since mid-March.
  • Durable goods orders rose 1.9% in September, well above consensus estimates. In addition, new home sales fell 3.5% to a still-blistering 959K-unit pace.
  • Consumer confidence edged down to 100.9 in October. Rising COVID cases may weigh on confidence in the months ahead.

 

Global - Renewed Questions Surrounding Global Recovery

  • Eurozone Q3 GDP jumped more than 12% quarter-over-quarter, although that bounce did not fully recover declines from earlier this year. More concerning going forward is the renewed spread of COVID and clear signs of softening in service sector activity. Thus while the European Central Bank held monetary policy steady this week, it gave a clear signal further easing should be expected in December.
  • In Canada an encouraging economic rebound continues, in turn prompting the central bank to stay on hold. Mexico’s Q3 GDP jumped after a large Q2 fall, while South Korea’s Q3 GDP gain was led in large part by export growth.



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Markets were also pressured from the latest ISM manufacturing report, which signaled further deterioration in the sector with the index falling to its lowest level since 2009.

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We added 850,00 jobs in June, but much of that was State governments school districts in some parts of the Country reopening just in time for summer break.

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Lock downs began to be lifted across most of the country by the end of May and the total amount of daily new coronavirus cases has been trending lower. But the flattening case count has not been consistent across the country.

November 2020 Economy At A Glance

U.S. gross domestic product (GDP) grew 7.4 percent, or $1.3 trillion in Q3, adjusted for inflation.

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Initial jobless claims rose to just over 1.4 million for the week ending July 18. Continuing claims fell to about 16.2 million. Initial claims edging higher suggests that the resurgence of COVID-19 may be taking a toll on the labor market recovery.

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Minutes from the October FOMC meeting indicated the Fed is content to remain on the sidelines for the rest of this year as the looser financial conditions resulting from rate cuts at three consecutive meetings feed through to the economy.

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U.S. GDP declined at an annualized rate of 4.8% in the first quarter, only a hint of what is to come in the second quarter.

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Retail sales fell 0.7% in December, the third straight monthly decline. Sales are still up 2.9% over the year, however.

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Fears of an escalating coronavirus outbreak reached the United States this week, as a Washington state man became the first confirmed domestic case and the international total reached more than 800.

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As with the Mets and Yankees when they ran into the Astros over the last couple days, consumers staying power is showing signs of running out as inflation persists and confidence moves sharply lower.


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