Fiscal fizzle saps US economic recovery

WASHINGTON: This week’s economic data offers fresh hints that the US recovery will slow without new federal aid, a possible blow to President Donald Trump’s reelection bid, especially since any new spending before the November 3 presidential election seems unlikely.
A slowdown in US consumer spending in August provided the clearest evidence this week that as millions of Americans lost the extra unemployment benefits that had sustained their finances in the early months of the COVID-19 recession, they have begun to cut back.
In an economy where consumer spending accounts for two-thirds of the total output, less shopping means less overall growth.
The number of Americans filing new claims for unemployment dropped less than expected, and applications for the week before were revised up, suggesting the labour market recovery has plateaued.
Meanwhile, a Fed survey released on Friday showed that American households were better off financially in July than they were in the first months of the crisis, in large part because of their access to government aid.
Other data this week indicate the recovery is ongoing in some parts of the economy.
US factory production increased for a fourth straight month in August, and confidence rose to a record among single-family homebuilders, who saw a boost to demand from low interest rates and pandemic-fueled demand for homes suited to remote work.
Broad consumer sentiment also picked up in September, a report showed Friday. Democrats grew more upbeat about the economy’s outlook while Republicans’ enthusiasm dipped, but overall consumer optimism is still down compared with before the crisis.
Next week Federal Reserve Chair Jerome Powell is scheduled to address lawmakers at three separate hearings, where he will undoubtedly make the same observation he has repeatedly made for months, including after this week’s policymaking meeting: more stimulus “is likely to be needed” for the recovery to continue.
The House, controlled by Democrats, and the Senate, controlled by Republicans, are deadlocked on any stimulus bill, and there’s little chance of it passing before the election
Eventually, Congress will pass some pandemic relief, no matter who wins the presidential contest. But it’s likely to be less under Trump, a Republican, than under Democratic presidential nominee Joe Biden. —Reuters SEE ALSO PAGE 15