Hit or miss, apparently.
Tuesday’s non-marquee data stateside was a mixed bag, with the Chicago PMI woefully missing estimates (it’s typically noisy anyway) and consumer confidence coming in ahead of expectations, near the top end of the range.
The jump in the Conference Board’s gauge looks to be among the largest in years. Nevertheless, we’re a long way from erasing the COVID plunge.
“Consumer Confidence partially rebounded in June but remains well below pre-pandemic levels”, Lynn Franco, Senior Director of Economic Indicators at The Conference Board remarked on Tuesday. “The re-opening of the economy and relative improvement in unemployment claims helped improve consumers’ assessment of current conditions, but the Present Situation Index suggests that economic conditions remain weak”.
As is the case with virtually every other data point from June, this needs to be considered in the context of new containment protocols across states where the virus is resurgent. Some of the bounce in key indicators may not hold in July if it becomes apparent that the country is in for a prolonged period of rolling lockdowns.
“Looking ahead, consumers are less pessimistic about the short-term outlook, but do not foresee a significant pickup in economic activity”, Franco went on to say. “Faced with an uncertain and uneven path to recovery, and a potential COVID-19 resurgence, it’s too soon to say that consumers have turned the corner and are ready to begin spending at pre-pandemic levels”.
Lawmakers would do well to heed that warning. Steve Mnuchin decided not to extend the tax filing deadline past July 15, and if the GOP moves to undercut efforts to extend extra federal unemployment benefits (which expire next month), the administration could find itself faced with another deceleration in consumer spending headed into the election.
“What’s notable ahead of the jobs report on Thursday is that the jobs plentiful component is bouncing back while reopenings are still in the early phase in many densely populated parts of the country”, Bloomberg’s Andrew Cinko writes, digging a little deeper into the confidence numbers. “There’s plenty of room for further improvement [but] the open question is whether the pause and/or reversals in openings that are now unfolding in the Sun Belt will send confidence reeling again in July”.
The cutoff for the survey was June 18, well before Florida, Texas, and, as of Monday evening, Arizona, reimposed restrictions, including closing bars and gyms.
The Chicago PMI, meanwhile, was just plain, old bad. At 36.6, it missed by a country mile. Consensus was looking for 45, and the most pessimistic estimate from 31 economists was 40.
Again, so much of any presumed recovery hinges not just on the evolution of the virus, but on lawmakers’ willingness to learn the lessons from the aftermath of the financial crisis.
In the simplest possible terms, governments cannot pivot too quickly back to old, demonstrably fallacious notions about deficits, debt, and spending.
If they do, thereby putting all of the burden on central banks again, you’ll get an anemic recovery and that’s if you get one at all. In that scenario, we’ll be right back to pretending as though we have no idea why central banks continue to plunge down the rabbit hole. (Hint: it’s because in the absence of fiscal policy, they have no choice).