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THREAD: Ahead of Thursday’s GPD report & President Trump’s closing argument that the “GREATEST ECONOMY EVER IS BACK,” let’s break down a few things
GDP is forecast to increase by 25-30%.
The president is expected to take credit for this # and use it as his final pitch that we’re on the mend and full force ahead with a V-shape recovery.
The Trump campaign is already running Facebook ads to this effect.
The president is expected to take credit for this # and use it as his final pitch that we’re on the mend and full force ahead with a V-shape recovery.
The Trump campaign is already running Facebook ads to this effect.
The president will describe this as a BIG WIN and a sign that we are BACK.
But the number will be big because we had a lot of ground to make up and because the stimulus deals jumpstarted the economy in the third quarter.
But the number will be big because we had a lot of ground to make up and because the stimulus deals jumpstarted the economy in the third quarter.
As covid rises in 42+ states, winter weather comes in and Washington remains at a standstill over the next stimulus deal – it could be an ugly fourth quarter.
We should keep in mind where we were last year and where we were last quarter, during the peak of Covid induced shelter-in-place/shut downs. (see Mark Zandi summary below)
WHY IS GDP EXPECTED TO GROW?
1. Because we were basically shut down in the second quarter. Even partial re-openings would have big impact on growth for Q3 & we know consumers were spending more when shelter-in-place orders were lifted.
1. Because we were basically shut down in the second quarter. Even partial re-openings would have big impact on growth for Q3 & we know consumers were spending more when shelter-in-place orders were lifted.
2. Auto and housing markets are also doing well as people move out of cities and buy homes/buy cars to get around instead of taking public transport
3. In the second quarter the economy shrank by 31.4% — that’s A LOT of ground to make up
3. In the second quarter the economy shrank by 31.4% — that’s A LOT of ground to make up
4. Stimulus: individuals and businesses got a lot of help to stay afloat during the 3rd quarter and that will be reflected in GDP growth
WHY SHOULD WE BE CAREFUL TO THINK A LARGE GDP # MEANS EVERYTHING IS BETTER?
1. Even with huge growth we will likely still be down 3-5% compared to end of 2019 – that would be nearly as deep as the 2008 recession
1. Even with huge growth we will likely still be down 3-5% compared to end of 2019 – that would be nearly as deep as the 2008 recession
2. There is still no new stimulus coming from Congress – more people will fall into poverty, more businesses will close, & more evictions are coming. Q3 growth was largely fueled by unemployment checks, PPP loans, & stimulus checks…at this point none of those exist for Q4.
3. Big businesses are still announcing large layoffs every week. This week Disney announced more layoffs and MTA says without more help they’d cut up to 8K jobs in 2021. At the same time job growth is slowing and weekly unemployment numbers are still high.
4. Covid cases are rising across the country which is causing some states to enact more restrictions. And with winter coming this could hit small businesses (especially restaurants) hard.
Mark Zandi’s (Moodys Analytics) take on this week’s expected big GDP numbers:
KEY POINT: The economy has long played a central role in determining the electorate’s vote for president. It still does. With perceptions that Trump’s handling of the economy still holding up, it is arguably the most important reason that the presidential race remains competitive
(Cont’d) The third-quarter real GDP number will reinforce these views, even though the reality is very different.
