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By Will Gatti | October 6, 2020
As the U.S. is attempting to continue to adapt to life with COVID-19, signs are showing that the economic recovery is losing steam. U.S. consumer spending rose only 1% in August. Since consumer expenditures make up around 70% of GDP, the monthly report by the Bureau of Economic Analysis holds great importance. The last 4 consumer spending reports provided telling insights into the economy as a whole. In May, June, and July, consumer spending rose 8.7%, 6.5%, and 1.5% respectively.
The rapid decline is partly due to a drop in personal income, which fell 2.7% in August as additional fiscal stimulus has yet to be passed by Congress. Today, Fed Chair Jerome Powell gave a pressing argument to Congress for more stimulus, noting, “Even if policy actions ultimately prove to be greater than needed, they will not go to waste.” This latest call to action expresses that anything will help and is a testament to the effectiveness of government funding to boost recovery.
Politicians failed to respond to this and will continue in a deadlock until after the election. In a tweet hours after Mr. Powell’s meeting, President Trump rejected the Democrats offer of $2.4 trillion, temporarily ending talks between the two parties. He stated that after the election, a “major Stimulus Bill that focuses on hard-working Americans and Small Businesses” will be passed.
Many small businesses throughout the economy have already closed, and it’s only a matter of time until more follow. Will Americans make it a little while longer? We will ultimately find that answer in the coming months and see if Mr. Powell’s tragic predictions come true.
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