Tom Porcelli, Managing Director and Chief U.S. Economist at RBC Capital Markets, joined Janet Engels, Head of the U.S. Portfolio Advisory Group, to discuss the post-COVID-19 U.S. economic recovery. Their conversation examined key economic data, outlook for employment and consumption, and the effect of stimulus measures.
“The worst is behind us at this stage…there is still some pain in front of us” – Tom Porcelli
It appears consumers are gradually becoming more comfortable with venturing outside their homes. According to a recent poll by The Harris Polling Company there is a surprisingly large number of respondents that want to get back to doing everyday things, and they want to do them fairly soon. On average 40% of respondents, if given the choice, would return to gyms, eating out at restaurants or going to the movies within three months of the virus curve flattening.
According to Tom, the recent U.S. fiscal stimulus package has done more than enough at offsetting their loss of wages and salaries, with a number of people actually making more money under the unemployment benefit than before. With the collapse in spending, due in large to the forced economic shutdowns, the savings rate jumped to an astonishing 33% - “Individuals saved about $5.6 trillion (annualized) in the month of March and April” (Daily Deck: Consumer: a coiled spring for 3Q?, June 1st, 2020). He believes that if things continue to improve on the virus front, the deployment of this large increase in savings could contribute to a sizeable increase in the GDP growth rate and further accelerate the recovery.
Although this sounds reassuring, some evidence also points to a slower more gradual recovery. The same poll also suggested that about 50% of people think they will die if they contract the COVID-19 virus - there is still a large amount of fear amongst consumers, making it difficult for many to embrace the economic reopening.
For more details on this topic and the outlook for the U.S. economy including inflation, deficits, taxes and interest rates, please click on the flowing link to Tom Porcelli’s 26 minute interview: The road to recovery for the U.S.
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