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Weekly economic review & outlook That’s not a knife. That’s a knife!

August 03, 2020

You Need to Know

Week in review

Record drop in real GDP for the second quarter

The economic shutdown in response to COVID-19 caused the worst quarter for the economy since at least 1947 as consumer and business activity came to a crashing halt in April.

No change from the Fed in July

The tone from the FOMC remained the same as in June with a focus on uncertainty for the outlook and further support for the recovery.

Week Ahead

Forecasts

ISM business surveys expected to show further strength for July

New government shutdown mandates are modest enough and the forward momentum in the economy is strong enough to continue the business recovery.

Another blowout employment report expected

While it won’t reach the pace of June’s record-setting report, July’s employment report is still expected to show great strength.

Modest increase projected for light vehicle sales

We project a gain in the annualized pace of motor vehicle sales to 13.4 million units, up from 13.0 million a month ago – but still down by about 23 percent from a year ago.

If Crocodile Dundee were talking about economic activity, he would have laughed at the downturns of the Great Recession, 1981-82, etc., and pointed instead to his own knife – the record drop in real GDP for the second quarter of this year. Real GDP plummeted at an annualized rate of 32.9 percent for the period — more than three times the previous largest decline since 1947 (when the quarterly data first were officially estimated). Even without the magic of compounding, the level of economic activity dropped by a still astounding 9.5 percent for the quarter. Combined with the first quarter’s decline, the economy contracted by 10.6 percent (not annualized) during the first half of 2020, putting the economy in an unprecedented hole that will take years to recover from.

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