AUGUST 3, 2020 – WE FACE A ROCKY ROAD AHEAD
Fed Chair Jerome Powell spoke last Wednesday, saying the coronavirus and the economic recovery are inseparably linked. He said “the path of the economy will depend significantly on the course of the virus.” He also noted economic activity and employment have picked up recently, but credit and debit card spending, and measures of job growth are slowing as virus cases spike.
Powell emphasized the Fed has only lending powers, and it is up to the government to buoy the economy during, which he referred to, as the most severe downturn of our lifetimes. He concluded by saying, “We’re not even thinking about thinking about raising rates.”
Consumers increased spending in June by 5.6 percent, but appear to have pulled back since then, restraining the economy’s recovery efforts, adding credence to Powell’s comments that the road ahead will not be easy. May spending was up 8.5 percent. The ability and willingness for consumers to return to the marketplace will be the key driver to a recovery. A University of Michigan survey has indicated consumer confidence fell in July. Many Americans have increased their savings rate substantially this summer, with the personal savings rate at 19 percent in June, more than double the average rate in February pre-pandemic.