The need for fiscal support

Posted by: Paul Donovan

01 Oct 2020

Daily update

  • Hopes for a fiscal stimulus package have risen a little in the US, with US Speaker Pelosi and US Treasury Secretary Mnuchin holding talks. However, the polarized nature of politics in the US does raise questions about how easy it will be to do a deal. Expectations are focused on a fiscal package by January, after the election.
  • The need for a fiscal package may be demonstrated by today's US personal income and spending data. The loss of additional unemployment benefits at the end of July hurt those who are unemployed. It also increased fear of unemployment (by raising the cost) and this slowed the pace of consumer spending.
  • South Korean export data came in at the top end of forecast ranges. This remains a signal of positive global demand. After months with nothing to do but watch home makeover shows on Netflix, consumers rushed to spend on consumer durable goods as soon as lockdowns eased. This favors South Korean production.
  • The Japanese Tankan business sentiment survey had huge forecast ranges, but was generally around what was expected. There are assorted business sentiment opinion polls in Europe which are not worth bothering with.

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