Government stimulus checks and tax credits for children, along with expanded vaccination campaigns in recent months, have raised hopes that the US economy was finally on the cusp of the pandemic, but the advance of the coronavirus delta variable and the waning effect of aid payments reduce spending.
Recovery on the right track
On Tuesday, Federal Reserve Chairman Jerome Powell said it was not yet clear whether the outbreak of the delta type of coronavirus would have a significant impact on the US economy.
“COVID is still with us. It’s likely to stay that way for a while,” Powell said, but “people and companies have improvised and learned to adapt. To live their lives despite COVID.”
Powell spoke at a webcast event with teachers and students, and much of the event included background information about the United States’ central bank and the importance of economic education.
But his brief comments on the recovery suggest that rising infections and delayed vaccination rates have not undermined the Fed’s view that the recovery will remain on track.
The pandemic “continues to cast a shadow over economic activity. We cannot declare victory yet,” Powell said. But “many companies have adapted their business models to the new world” and can move forward.
Consumption less than expected
Despite Powell’s comments, Tuesday’s data from the Commerce Department indicates that Americans consumed much less than expected in July. Its spending was down 1.1% compared to June.
This data is important in assessing the health of the world’s largest economy, because consumer spending accounts for three-quarters of GDP and is the engine of growth.
“People have eaten a lot in restaurants and bought gadgets and appliances, but that’s it,” explains economist Joel Narov.
To be sure, auto production, still slowing sharply due to a shortage of semiconductors and declining sales of new cars, has weighed heavily. Car sales fell 4.3%.
But purchases of clothing, as well as construction and gardening equipment, are also declining.
On the other hand, gas stations are having a good moment, but thanks to the increase in fuel prices for months.
“Award-winning zombie scholar. Music practitioner. Food expert. Troublemaker.”