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Economic activity is sprinting ahead, but this is more of a marathon

SEP. 15, 2020

Economic Review: Continued recovery, but it appears to be slowing (Page 3)

GDP plummeted at a record-breaking pace in the second quarter, but May/June data showed a surge in activity that provides the momentum for a record-breaking rebound for the third quarter. More recent data, however, suggest slowing for July and August. Nonfarm payrolls had another – albeit smaller – seven-figure gain in July, while daily/weekly surveys show a flattening of mobility as rising infection rates caused some governments to reinstate modest restrictions. The pace of growth is not what it was in May and June, but from a historical perspective it remains very strong.

Financial Markets Review: Markets cheer for earnings (Page 4)

Equity market investors cheered better-than-expected earnings reports, mostly ignoring the rise in new coronavirus case counts, fears of a stalling recovery, and political squabbling. Fixed income markets rode the wave of monetary support (both current and prospective) while commodities were optimistic about world growth prospects. The dollar slipped again in July while precious metals jumped (with gold rising to all-time highs).

The Outlook: A long recovery should keep policy supportive (Page 5)

The eye-opening 33 percent decline in real GDP in the second quarter goes a long way toward putting the recession of 2020 into perspective. Not only was this by far the sharpest drop in the more than 70-year history of the data series, it also significantly exceeded the cumulative declines across every contraction over that same time frame.

Go deeper with the full August report linked below.

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