Trump's Stimulus 'Zigzag Moves'... A 'Disaster' for US Consumption

Adverse Factors in Year-End Shopping Season... CNBC: "Unpredictable Stimulus Measures Cause Consumer Sentiment Anxiety"
No Progress in $25 Billion Aviation Industry Support Negotiations

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] Uncertainty about the U.S. economy is increasing as President Donald Trump shows erratic behavior over the stimulus bill negotiations. Especially with the large-scale shopping season around next month’s Thanksgiving approaching, there are concerns that a contraction in consumption could act as a major negative factor.

On the 7th (local time), The Wall Street Journal (WSJ) reported that President Donald Trump urged Congress to sign individual bills supporting the aviation industry, small businesses, and American citizens, stating, "Sudden changes in direction are increasing uncertainty about the government’s stimulus policy outlook." After Trump ordered a halt to stimulus negotiations the day before and then changed his stance hours later by saying he was ready to sign some support measures, concerns arose that the situation is moving in an unpredictable direction.

House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin discussed a $25 billion support plan for the aviation industry on the same day but failed to achieve significant progress. White House National Economic Council Director Larry Kudlow claimed, "If the support amount is smaller, a deal is still possible," but White House Chief of Staff Mark Meadows admitted that reaching an agreement is difficult.

Speaker Pelosi opposed President Trump’s call to pass a support bill that would issue $1,200 checks to individuals. She sharply criticized, "What President Trump wants from the negotiations is nothing but to send checks with his name on them." The issuance of individual checks is also criticized as being used as part of an election campaign.

Uncertainty about the U.S. economy is even threatening the large-scale shopping season. CNBC pointed out, "The unpredictable stimulus negotiations will have disastrous consequences for the consumer sector," adding, "Consumer sentiment is becoming unstable ahead of the year-end shopping season, including Black Friday." Since the shopping season accounts for two-thirds of the U.S. economy, a slump in this period would inevitably cause greater damage to the U.S. economy.

The Wall Street Journal (WSJ) reported that U.S. experts are turning negative on economic forecasts. Consulting firm RMS US lowered its Q4 U.S. economic growth forecast from 5.1% to 2.5% after President Trump declared a halt to stimulus bill agreements before the election. Evercore ISI economist Ernie Tedeschi said, "The signal that there will be no further stimulus for the rest of this year means the U.S. economy will face another headwind." Morgan Stanley predicted that without additional stimulus measures, the economy will only recover to pre-COVID-19 levels by the end of next year.

Not only Federal Reserve (Fed) Chair Jerome Powell but also Fed members expressed concerns about delays in the stimulus bill. According to the minutes of last month’s Federal Open Market Committee (FOMC) released that day, most members expected the pandemic-related stimulus package to be approved within this year. They diagnosed, "If the new package fails, economic growth in Q4 will slow faster than expected."

However, the New York stock market rebounded that day, including the Dow Jones Industrial Average (up 1.91%). Analysts suggest that expectations for a large-scale stimulus package if Democratic candidate Joe Biden wins were reflected more strongly than support for the aviation industry. Wall Street analyst Edward Moya explained, "The impact of expecting Biden’s victory is significant." The Democratic Party has prepared a stimulus plan worth $2.2 trillion, which is larger than the $1.6 trillion plan prepared by the White House.

President Trump is drawing his supporters’ attention by attacking China. On Twitter that day, through a prerecorded video, he said, "(The COVID-19 outbreak) is not your fault," adding, "It is China’s fault. China will pay a big price."

This content was produced with the assistance of AI translation services.