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US consumer spending sinks by record 13.6% in face of virus


Aniela let me start with you and With the caveat that we're GONNA have Nancy Marshall Genzer here in a minute talking about personal income. I want to get your take as the trained economist in the room on the on the thirteen point something percent drop in consumer spending in the past month and I want you to frame it in terms of well. Consumers are basically this entire economy. Now what do we do right? The consumers are the engine of growth for the economy but the consumer has been staying at home. Many of us are under lockdown orders. That are just now starting to ease and so what we've seen. Is this phased in transition from a near lockdown of the national economy in April to a phase reopening That's happening in stages in so consumer spending is under the weight of that lockdown in terms of. Well there's nothing to spend our money on besides basic goods But also Some fear about re reengaging with the economy without social distancing protection and so the key to the recovery will be that consumers feel healthy both physically and financially to get back to spending at their normal levels. And we're GONNA talk about that a little bit with with Marshall Genzer Minute Gina As sort of along those same lines Fisher J. Paul did a thing today with Ellen blinder at Princeton Sort of a Q. And a. It was. It was a very nice little chat with those guys who've obviously known each other forever. But one of the things Alan blinder said. He's a professor of economics at Princeton. He said look. You guys are crossing some red lines in this crisis and Powell came back and said. Yeah you know what? I'm okay with that because this is different. I thought that was a remarkable thing for the guy running the American economy to say remarkable. You know basically said emergency unlike anything we've ever seen before if we didn't cross the red lines we'd have to explain ourselves to the American people and say why. Why didn't you do everything you possibly could do to save. The enemy was a remarkable statement. I think it's it's really interesting coming from pal too because he has historically been particularly concerned about crossing. Some of the red lines at the Fed has crossed one of them for example is fine municipal debt. You know. That's that's something Derek opt to start doing. It's something that he's been asked about four in asked he was always very quick to say. That's a lie. Don't Cross picking winners and losers This crisis Bonilla's so Senate Majority Leader Mitch. Mcconnell said today just sort of on those along those lines of this being you know an unprecedented crisis senator. Mcconnell said today you know the next relief bill whenever it comes Is probably going to be the last one you buy that now. Not at all because we're still in the early transition of the of the economy. The second quarter is supposed to bear the brunt of the economic toll of covid nineteen remember. We've already seen a five percent decline and US GDP just on basis of two weeks of a shutdown in late March. So imagine what the second quarter is going to look like and you know. Much of the stimulus has come at a time when people can't spend because they're at stale they're staying at home so I expect that there will be more stimulus. We may see some some green shoots of recovery in the second half and it's likely that we will but that's going to be in the midst of an uptick in bankruptcy says firms struggle to make this transition and some longer term effects in terms of the forty million people who are now seeking or have Unemployment benefit so. There's a long red to recovery and I don't think we get it. We get out of a relief effort from the from the government that quickly so junior. You did a piece of honestly and I apologize. I don't remember if it was today or yesterday about the shape of this recovery in the line stuck with me is v stands for very unlikely which I kinda love. Let's riff on that. Green shoots thing What do you see out there that gives you hope if anything right so I think if there's one hopeful take away from that road it's that we're not in for an out so it's very unlikely the growth just fell off a cliff and it's just gonNa stay low forever and that's it because what we're seeing is that activity is picking up in an starting at certain improve as we kind of get used to living in this world at a one thing that's important to note? Is that activities picking up in places that have reopened not really markedly different way than it is in places that have reopened more fully at While to sign of green shoots. I think it's also reason to be modest in our expectations. What's going to happen? As we reopen doesn't seem like he blurts pouring back into their lives with unbounded doozy Azam. Here nearly you by that. And what green shoot do you like it if any well I? I think it's the preconditions that we were. In prior to the pandemic. It's important to remember. This is a a biologically triggered downturn that the economy wasn't broken Going into the outbreak in the pandemic and so there are several things that were already in place like a healthy banking system that can support some pretty intense and aggressive fed action through the banking system. That wasn't the case in during the financial crisis the banks were the problem. We've also seen consumers have relatively healthier balance-sheets than they did during the financial crisis in terms of them out of debt relative to their income. So some of those conditions will help with the economic toll. But right it's going to be. I think a slower road than a V. shape And it's going to be based on biological and medical advancements not just reopening alone

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