Thinking stimulus

Posted by: Paul Donovan

24 Jun 2020

Daily update

  • US Treasury Secretary Mnuchin has been thinking about delaying tax payments again (they were already delayed from April to July). In addition, the US administration has been discussing another potential stimulus plan with Republican members of Congress.
  • Fiscal policy focus will need to shift. So far, fiscal policy has been about transfer payments—less a stimulus, more an anti-depressant. As lockdowns end fiscal policy will need to move to address the spare capacity that has built up in economies and labour markets—which means more than delayed tax payments.
  • The UK government has announced that English pubs will be allowed to open from early July. (Other lockdown easing measures were also announced.) The service sector has most to gain from lockdown easing: UK online spending gave some support to the goods sector in lockdown.
  • European sentiment opinion polls are due in France and Germany. Markets do seem to be learning the value of this data (i.e. little). Dutch first quarter GDP was revised higher. This is likely to be a pattern elsewhere. Early GDP estimates use statisticians' guesses for what happened in March. March was not a normal month anywhere, and those guesses were generally too pessimistic.

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