(May 1, 2020, 8 p.m. EST) - The U.S. economy in the first quarter of 2020 shrunk by 4.8%, and the second-quarter is expected to be five times worse due to the partial shutdown of the economy.
Consumption plunged at a rate never before experienced, according to the newly released data from the U.S. Bureau of Economic Analysis.
Right now, a severe contraction is underway. The consensus forecast of the 60 economists surveyed in early April by The Wall Street Journal was that the U.S. would shrink 25.3% in the second quarter, and this terrible quarter would be followed by strong economic growth of more than 6% for the next three quarters. These economists are the top names in the field.
With Americans under stay at home edicts in March, and not consuming, the savings rate boomed. And this is not the only anomalous piece of good news.
Inflation is nowhere near the Federal Reserve's 2% target. The inflation index against which the Fed sets policy, the Personal Consumption Deflator (PCED) has been at trending at 1.5% for a decade, and it does not look like we're headed toward the 2% rate of inflation anytime soon. That means the Fed can expand the money supply without worrying much about rousing inflation.
With inflation low even though interest rates are near zero, liquefying the economy through U.S. Government largesse via the Paycheck Protection Program, Supplemental Nutrition Assistance Program (SNAP), and boosting unemployment insurance compensation payments, adds a negligible amount to the long term debt.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation, or advice of any kind, and it is subject to change without notice. It does not take into account your investment objectives, financial situation, or particular needs. Product suitability must be independently determined for each individual investor.
This material represents an assessment of the market and economic environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Forward-looking statements are subject to certain risks and uncertainties. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete, and is not intended to be used as a primary basis for investment decisions.
This article was written by a professional financial journalist for Advisor Products and is not intended as legal or investment advice.
© 2024 Advisor Products Inc. All Rights Reserved.
Eagles' Club
Administration office:
120 Encino Avenue
Camarillo, CA. 93010
Los Angeles Office
10880 Wilshire Blvd. Suite 2222
L.A, CA. 90024
Fax: 818-992-9997
Toll Free: 866-900-AIDA
aida.eaglesclub@adviserfocus.com
Mutual of Omaha Investor Services, Inc. and its representatives do not provide tax or legal advice. Any tax or legal information provided here is merely a summary of our understanding and interpretation of some of the current regulations and is not exhaustive. Tax-law is subject to frequent change; therefore it is important to coordinate with your tax advisor for the latest IRS rulings and specific tax advice, prior to undertaking an investment plan.
Securities offered through Mutual of Omaha Investor Services, Inc. a Registered Broker/Dealer. Member FINRA/SIPC. Advisory services offered through Mutual of Omaha Investor Services, Inc., a SEC Registered Investment Advisory Firm. Eagles' Club and Mutual of Omaha Investor Services, Inc are not affiliated.
Securities, Insurance and Advisory licensed in State of California. California Department of Insurance License Number 0660322. Also Insurance licensed in Kentucky.