"Fore!"

Posted by: Paul Donovan

13 May 2020

Daily update

  • US House Democrats are proposing another USD 3 trillion fiscal package (fiscal package number four, if you are keeping track. The last package was a top-up and so does not count). US Republican Senate Majority Leader McConnell has said that there is no urgency or need to act immediately.
  • US Fed Chair Powell is speaking today, and may suggest it is urgent that policymakers act immediately. The Fed has been more concerned about the risks of corporate failure (and associated permanent job losses). The economic bounce back depends on people having jobs and being willing to spend, and companies still existing and being able to sell. Central bank policy can do little to help.
  • The UK GDP data was better than consensus, but the consensus range is so wide it represents little more than economists throwing random darts at a dartboard while blindfolded. Barclaycard credit card data showed further weakness in spending in April (some of which is the lower oil price), with rising savings – though online spending is strong as the virus accelerates long-term structural economic changes.
  • The Eurozone's March industrial production is not especially useful information. US producer prices have quality problems, but should show disinflation forces continue.

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