No s'mores. Maybe more growth

Posted by: Paul Donovan

27 Aug 2020

Daily update

  • The Jackson Hole summer camp for economists and central bankers starts. This year it is virtual - no roasting s'mores over an open fire, which reduces the fun. US Fed Chair Powell speaks today, offering insight into the medium-term plan. However, events have reduced the fun here too. We know rates will stay low for a long time. We know any medium-term plan will have to change. Powell is unlikely to be able to change market expectations.
  • Eurozone M3 money supply is due. The growth of money supply is slower than it was during the global financial crisis. The past increase in money supply did not create inflation because it was in response to an increase in money demand. This situation is not likely to be any different.
  • The US has imposed sanctions on additional Chinese companies. Markets expect this sort of behavior.
  • French business confidence data can safely be ignored without harming anyone's understanding of the French economy. US second quarter GDP is to be revised (they are still annualizing the data, which is ludicrous). As a general rule, economic activity data should be revised stronger. People have adapted in the face of adversity, but it takes time to record how people have adapted.

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