Another day, another compromise

Posted by: Paul Donovan

21 Jul 2020

Daily update

  • In the grand tradition of the EU, a compromise deal has been agreed on the EU Recovery Fund. The heads of government meeting dragged on far, far longer than expected (except these meetings are expected to drag on longer than expected) – but the deal was basically as expected. The precedent of joint fiscal action is established. The amounts involved are minor compared to what national governments are doing.
  • In the US, House of Representatives Speaker Pelosi is to meet with Treasury Secretary Mnuchin to talk about the next fiscal stimulus plan. The US has to do more in terms of new stimulus than does Europe, but the US has needed to catch up with the European social security net. For Europe, this is an automatic stabilizer that does not need new fiscal packages to implement.
  • Korea trade data for early July showed exports are still declining (though the data is not especially alarming after adjusting for working days). Exports to China softened, though that may not say anything about Chinese domestic demand.
  • Japanese consumer price inflation was unexciting (as most inflation data is these days). Department store sales are still falling. International comparisons are difficult because online retail is at different stages of development in different countries.

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