Pandemic effects seem to effective for a long time

In the first quarter, where the leading effects of the coronavirus pandemic were observed, the US economy shrank by 5% on an annualized basis.

In the first quarter, where the leading effects of the coronavirus pandemic were observed, the US economy shrank by 5% on an annualized basis. Since the first quarter covers the period up to 31 March, the April-May period, where the pandemic's worst effects are seen, is outside of this, so GDP is not actually up to date and does not reflect the current situation. We will see the main big impacts for the 2Q20 data, and the stagnation effects will be more clearly observed in the framework of closures and quarantine measures, as well as slower private consumption. In terms of growth main items, consumption, investment and net export trends together have a negative effect.

Damage in durable consumer goods orders from data that is more flash and reflects the current situation is not at the expected size. In April, the headline data saw a contraction of 17.2% on a monthly basis, while the core data, which excludes transportation and aircraft components, has shrunk by 7.2%, better than expected. The 47% contraction in transportation and the reduction of aircraft orders to zero explain the difference between headline and core data. In non-defense orders, except aircraft, a 5.8% contraction is observed as a better data than the 10% contraction expectation.

Since it is a high frequency data during the pandemic period, we are getting a lower number for the first time on the side of unemployment claims. Of course, the new claims are still over 2 million. The US economy created more than 35 million new unemployed people in 2 months during the coronavirus pandemic. We will see a stabilization in the loss of labor force, and just like the case/death curve, the unemployment curve will be flattened and then down. The main problem is how much of the lost labor force can be returned and for how long. Here, it seems that the main problem will be for SME-style businesses and local businesses. Economic activity, employment, production and demand components will recover a certain amount in the normalization period, but will remain at worse levels than the pre-virus period.

Source: Tera Menkul
Hibya News Agency

 

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