Surge in confirmed cases of COVID-19 in multiple U.S. States, result U.S. economy is once again in deep trouble.
Tencent Securities reported on July 23 that restaurant orders have begun to decrease, the rebound in air travel is stabilizing, and store traffic has once again reduced. More and more evidence shows that with the soaring number of coronavirus infections and deaths, the United States’ fragile economic recovery has stalled.
Real-time economic indicators bottomed out in May. Because home isolation was lifted in many states, many Americans felt safe enough to start going to shopping centers, restaurants, and even airports.
This brings hope to the United States-perhaps it can quickly achieve a V-shaped recovery from the historical collapse caused by the pandemic.
But now people are increasingly feeling that with the surge of coronavirus infections in California, Texas, Florida and other Sunbelt states, economic recovery is losing momentum.
Joe Brusuelas, the chief economist of RSM International, wrote in a report to clients on Tuesday: “The premature reopening of the U.S. economy has led to an increase in the epidemic and is now leading to a slowdown in economic growth.”
As the fragile economic recovery has stalled, the U.S. Congress is discussing whether the economy needs more stimulus measures and how much stimulus needs to be provided. Unless Congress takes action, the weekly increase of $600 in unemployment benefits will expire this month.
Economists say this plan is specific: economic recovery is faltering.
Jefferies chief economist Aneta Markowska wrote in a report on Monday: “Economic activity in surge hot spots of the COVID-19 is now clearly shrinking, including the Sunshine Belt and the West.”
Considering that 22 states have canceled or suspended economic restarts for health reasons, this is not surprising.
Hopes for recovery are too optimistic
The U.S. economy will continue to shrink in the third quarter. Economists are still betting that GDP will improve substantially after a sharp decline of 34% in the second quarter. But now they worry that their forecasts for incredible growth may be too optimistic.
For example, S&P Global Economics warned on Wednesday that due to the health crisis, the company’s forecast of an annualized GDP growth rate of 22.2% in the third quarter “may be too optimistic.”
S&P economists wrote: “Although our basic forecast is that the economy will gradually recover next year, the (recently) surge in new crown cases and the increase in hospitalization have caused people to worry. It is more likely that the epidemic will occur. The resulting recession has not yet bottomed out.”
The latest real-time economic indicators show that these concerns are justified.
Air travel is even more turbulent: the surge in confirmed new coronary pneumonia is hindering a moderate recovery in the tourism industry. Bank of America data shows that in the week ending July 20, the number of passengers passing through the TSA security checkpoint has declined from the previous week. This indicator dropped by more than 70% from the same period last year.
United Airlines Chief Executive Scott Kirby said in an interview with CNBC that the company does not expect commercial flights to return to normal until “the vaccine is widely available.”
Trouble with restaurants: CNN’s business recovery data shows that OpenTable’s restaurant reservations have decreased in recent weeks. When the epidemic was raging in March and April, the number of bookings dropped by nearly 100% from a year ago. This number rebounded in mid-June, “only” fell by 50%, but has since fallen back to 65% as of Monday.
According to data from Placer, the traffic to Chipotle dropped by 47% in the first week of June. This is an analysis platform that uses anonymous location data. By the end of June, the passenger flow had fallen by only 30%, but by mid-July, the passenger flow had “stalled.”
Retail slowdown: According to Cowan, U.S. retail traffic dropped an astonishing 98% in April. Afterward, passenger traffic has steadily improved. In June, passenger traffic fell by 57%, but this rebound has stalled. Cowan said that in the second week of July, U.S. retail traffic decreased by 47% year-on-year, worse than the 45% in the first week of July.
Small business failures: According to Jeffrey’s data, as of Sunday, 24.5% of small businesses in the United States have closed down. This is worse than the situation at the end of June when only 19% of companies shut down. Jefferies pointed out that “the hot spots of the new crown epidemic are particularly weak” and pointed out that the number of small business employment has dropped to a level not seen since the end of May.
Weak spending: After a 31% year-on-year decline in early April, the credit card consumption index issued by Synchrony turned positive at the end of June. However, Synchrony said that consumption in the first two weeks of July fell again by 2%.
Unemployment website visits: Jeffery stated that visits to U.S. state unemployment portals “remain at a high level, suggesting that the labor market momentum has stalled,” which is in line with official statistics released by the CNN Business Recovery Dashboard Coincide. The data shows that the number of people applying for unemployment benefits has fallen from the peak of this spring, but still at a high level. Last week another 1.4 million Americans filed for unemployment benefits for the first time, which is the first weekly increase since the end of March.
Bank of America economists wrote in a report to customers on Wednesday: “The spread of the virus since mid-June has harmed economic activities. It is clear that the road to economic recovery cannot be freed from the effects of the virus.”
Is it impossible to get out of the crisis without a vaccine?
This is not to say that all current real-time indicators are unfavorable. For example, Jefferies noted that one of the last few signs that bottomed out — the U.S. employment ranking index created by the bank and alternative data platform Thinknum — continued to improve even last week.
Despite this, the Federal Reserve Bank of New York’s weekly economic index fell for the first time since hitting the epidemic low in late April. The index includes indicators such as the job market, consumer behavior, and commodity production.
The hope for a vaccine, coupled with the Fed’s unprecedented loose monetary policy, has driven the stock market soaring. The Standard & Poor’s 500 Index has risen 46% since its low on March 23 and has now turned up during the year.
On Wednesday, Pfizer announced that it would spend US$1.95 billion to produce millions of doses of the new coronary pneumonia vaccine for the U.S. government, indicating that tangible progress has been made in vaccines.
However, executives in the healthcare industry are still more cautious than Wall Street. Among medical industry leaders surveyed by Lazard, 73% estimated that vaccines would not be widely available until at least the second half of 2021.
“It is becoming increasingly clear that without an available and widely distributed vaccine,” RSM’s Brusuelas said, “the economy will not fully recover as the surge in new cases continues.”