US economy plummets, hopes rest on support measures

The gross domestic product of the United States crashed in the first half of 2020. The latest growth figures from the second quarter show how deep the US economy has fallen: According to these figures, economic output fell at an annualized rate of almost 33 percent between April and June – the steepest decline in the US economy ever, at least in the period after the Second World War. Economic output already contracted in the first three months of the year at an annualized rate of 5 percent compared with the final quarter of 2019. The previous year’s level is a long way off. The Corona pandemic is to blame for the crash: fear of contagion and tough lockdown measures caused enormous losses, particularly in terms of investment and private consumption. The number of unemployed rose to dizzying heights, with the unemployment rate peaking at almost 15 percent in April….

US economy needs consumer incentives

In the USA there is to be a new economic stimulus package soon, politicians agree on that. This is important because the economy is still in a deep crisis: While many economic indicators in June pointed to a strong recovery, the last few days have seen the first disappointments: The consumer climate at the University of Michigan, for example, deteriorated in July compared to the previous month. Given the dramatic increase in new corona infections, consumer uncertainty is hardly surprising. However, the still high unemployment figures – initial applications for unemployment benefits have even risen again recently – and the imminent expiry of additional unemployment benefits are probably depressing consumer sentiment at present. There is still disagreement about the concrete form of new measures. At least the Republicans have now obviously come closer together: According to their wishes, the new aid package is to weigh around 1 trillion US dollars,…

USA: Corporate earnings collapse

The reporting season in the USA started last week. In the second quarter, corporate earnings are likely to have fallen by almost 50% year-on-year. This would be the sharpest drop since the 2008 financial crisis. In particular, corporate earnings in the energy and consumer goods sectors are likely to have fallen significantly. Energy companies suffered from the low price of oil, while consumer goods manufacturers felt the impact of the collapse in demand and disrupted supply chains. Airlines, car manufacturers and companies in the travel & leisure industry (hotels, cruise ships, casinos) were particularly hard hit. Many of the companies are in the red. They are partly dependent on state aid. Analysts do not expect profits to rise in any of the eleven US sectors. Even the cyclically stable utility stocks are likely to have earned less than last year. The same applies to the IT sector, where profits are…

US economy between hope and fear – second lockdown but unlikely

The news from the USA is currently divided into two parts. On the sunny side are the latest reports on the economic situation. Whether on the housing market, the consumer and industrial climate or the employment figures – everywhere the indicators have been moving upwards again recently, in some cases even very steeply. On a positive note, the ISM purchasing managers‘ index for the manufacturing sector even managed to cross the growth threshold in June. It now stands at 52.6 points. The loosening of the lockdown measures and the extensive state aid measures have evidently given the economy a new impetus. Certainly, the values from before the crisis are not yet being reached again. Particularly noteworthy is the unemployment rate, which currently (June) stands at 11.1 percent. The annual average for 2019, i.e. „before Corona“, was much lower at 3.7 percent. Nevertheless, the data show that the economy can recover…

The political tailwind for the US dollar is weakening

Since Donald Trump took office as US President three and a half years ago, he has provided ample opportunity for discussion. In many respects he has broken new ground, violated diplomatic conventions and regularly pushed the envelope of good taste. Nevertheless, it is not only his party friends who must attest to his remarkable economic success. Anything less than a re-election of Trump seemed unthinkable a few months ago. Neither the trade war with China nor the impeachment proceedings could do anything to change this success story. And then came Covid-19. Trump is currently facing unprecedented headwinds. His democratic challenger Joe Biden now has an extremely comfortable lead in the polls. There are 127 days left until the US presidential election, a small eternity in such volatile political times as the current ones. It would be foolish to assume even now that the change of power is certain to come….

Fed: anchoring low capital market yields

On 9 and 10 June, the Council of the US Federal Reserve will meet. At the forthcoming FOMC meeting, the US currency watchdogs are likely to discuss in depth the possibility of so-called „yield curve control“. As in Japan, yield targets for certain, generally longer maturities will be set by the Federal Reserve. Also on the agenda are the revised projections, a possible concretization of the forward guidance and the question of whether the Fed will make statements about the amount of future bond purchases. Given a key rate corridor of 0.00%-0.25%, no changes are to be expected in this regard. In various speeches the Fed’s upper echelons have recently discussed how they can anchor capital market yields at a low level in the medium term. However, whether the Fed will actually dare to make the paradigm shift and switch to yield curve management is not only questionable, but in…

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