By Dominique Dwor-Frecaut 30-07-2020

US Growth Back To Full Speed Ahead?

(3 min read)
Resize text:

The recovery is likely to move sideways for a month or so before restarting due to the implementation of the new COVID-19 budget package and a decline in new cases.

The past few weeks have shown signs that the recovery has stalled. Initial unemployment claims edged up, high-frequency indicators of retail sales are stalling, and the New York Fed Weekly Economic Index has moved south. The slowdown reflects the surge in COVID-19 cases since mid-June that has seen several states slow or partially reverse their re-openings.

Economic activity, however, is better correlated with mobility indicators than re-openings, as shown for instance by an IMF study of US states and EU countries. Mobility is, of course, a high-frequency proxy for rather than a causal driver of economic activity. Confidence likely drives both. A very large increase in savings reveals household loss of confidence since the pandemic (see Three Conditions For a Lasting Inflation Acceleration). A significant share of those savings have ended up in liquid assets such as bank deposits or money market funds.

I expect a recovery in confidence that will see households and businesses dip into their savings and re-energize the economic recovery. I believe the recovery in confidence will probably come from the implementation of a further COVID-19 relief budget package and from a decline in new COVID-19 cases, possibly to very low levels.


£39/month thereafter

For access to our Slack Chat Room, where we discuss all things markets with our researchers and subscribers



Why EM Capital Inflows Are Here to Stay (in Asia at Least)

By Caroline Grady | Jul 30, 2020
The recovery is likely to move sideways…

Where Can you Get Higher Bond Yields?

By Caroline Grady | Jul 30, 2020
The recovery is likely to move sideways…


Inflation! What Inflation? (1 min read)

By Bilal Hafeez | Jan 11, 2021
Summary China has increased fiscal deficits, credit,…

Three Reasons for Optimism on Global Growth (2 min read)

By Caroline Grady | Jan 08, 2021
Summary Fresh COVID restrictions leave downside risks…

Which Jobs Will AI Take Over? (5 min read)

By Sam van de Schootbrugge | Jan 06, 2021
Summary A new NBER working paper reveals…