U.S. Consumer Spending Slips As COVID-19 Cases Skyrocket

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On the latest edition of Market Week in Review, Quantitative Investment Strategist Dr. Kara Ng and Julie Zhang, director, North America sales enablement, discussed the latest progress toward a U.S. stimulus package. They also highlighted recent global economic data releases and revealed their top investment theme for 2021.

U.S. retail sales fall, jobless claims rise as Congress readies relief bill

As of mid-morning Pacific time on Dec. 18, U.S. lawmakers were finalizing a deal on an approximately $900 billion coronavirus relief package, Ng said. The package is likely to contain renewed federal unemployment insurance benefits of $300 per week, in addition to stimulus checks of approximately $600 for individuals, she noted. Additional funds for schools, transportation, COVID-19 vaccine distribution, and small businesses are also likely to be included, Ng added.

The proposed bill does not feature additional aid for state and local governments or COVID-19-related liability protections for businesses—both of which had become major sticking points between Democrats and Republicans, she said, adding that these issues appear to have been set aside for now. “While negotiations around this rescue package could continue for a few more days, the ultimate takeaway is that Congress is close to reaching an agreement—and that’s great news,” Ng remarked.

Weaker economic data released over the past few weeks has underscored the need for additional fiscal stimulus, she said, pointing to U.S. retail sales, which fell by 1.1% in November. “The consumer is the backbone of the U.S. economy, and this decline signals that the consumer may need more support,” Ng stated. The resurgence of COVID-19 infections across the U.S. this fall, coupled with an increase in government-mandated lockdown measures, are some of the likely culprits behind the dip in spending, she added.

In addition, while the nation’s labor market has recovered over half of the 22 million jobs lost during March and April, the pace of recovery has slowed recently, as evidenced by November’s weaker-than-expected jobs report, Ng noted. Initial U.S. unemployment claims for the week ending Dec. 12 also reached the highest level in three months, she added, with 885,000 Americans filing for new jobless benefits.

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