The United States is trying to restart the economy from the "pain" of the epidemic, but this "pain" is not so easy to alleviate and survive. On May 19, the US Congressional Budget Office (CBO) released its "bleak outlook" on economic growth, unemployment and the federal budget, saying that the US economy contracted by 4.8% in the first quarter of this year due to the impact of the new coronary pneumonia epidemic. Gross domestic product (GDP) will contract by another 38% in the second quarter; the overall economic downturn in the US economy will continue until 2021.
In order to prevent the economy from continuing to decline, US President Trump signed an executive order on May 19, authorizing the federal government to reduce some unnecessary regulations that hinder economic development, and called on overseas manufacturers to return to the United States to set up factories and move the supply chain to the United States.
U.S. GDP second quarter may suffer the biggest decline in history
In the latest outlook released on May 19, the US Congressional Budget Office predicts that due to the long-term impact of the new coronary pneumonia epidemic on the labor market, the United States ’real GDP will shrink by 11% in the second quarter of this year and down by 38% year-on-year. It will increase by 26 million compared with the end of 2019.
Earlier on May 16, the Federal Reserve Bank of Atlanta estimated that the US GDP in the second quarter might plummet by 42.8% based on a measure (GDPNowcast model), the largest single-quarter decline since World War II. The Atlanta Fed said that 68% of the US GDP, personal consumer spending will fall by 43.6% in the second quarter; on May 8, this expectation is a 33.9% decline. In addition, private domestic investment, which currently accounts for 17% of total US GDP, is expected to plunge by 69.4% in the second quarter, compared with a 62.8% decline a week ago.
The US government ’s assessment is roughly in line with Wall Street economists ’predictions. On May 13th, Goldman Sachs Group chief economist Jan Hazus and his team released a report that the U.S. GDP will fall 39% in the second quarter, which is worse than the 34% decline forecast . At the end of April, Citigroup ’s Economic Expansion Index had fallen to its lowest level since January 2003. This judgment is supported by a series of data-the US April retail sales data released on May 15 fell by 16.4%, the worst in history; the US factory output data in April fell by 13.7%, which is the data The worst level ever; the US industrial output data for April fell by 11.2%, the worst level in 101 years.
In this regard, the US Congressional Budget Office warned on May 19 that the rate of economic decline is so fast that the depth of the economic recession is still uncertain. Although the office expects the US economy to recover from the third quarter of this year and job opportunities will increase, the recovery process will be quite long, and the overall environment will remain sluggish until 2021.
Economists believe that if the overall outlook is predicted to be true, it will be the worst decline in the US economy, which means that the US economy has stalled due to efforts to contain the pandemic of health events. Kevin Hassett, President Trump ’s senior economic adviser, has recently stated: “The second quarter will be a huge negative number ... I think it ’s important to make people realize in a very pessimistic way that this It is the biggest impact our economy has ever suffered. "
US fiscal deficit will reach unprecedented scale
In addition to the economy may suffer the biggest decline in history, the US Congressional Budget Office also warned again in the report on May 19 that this year the US fiscal deficit will reach an unprecedented scale.
The US Congressional Budget Office predicts that the US fiscal deficit will reach 18% of GDP in 2020, which is four times that of 2019; the US federal debt will account for 101% of GDP. Both of these ratios will become the highest values in the United States since World War II.
Since the outbreak, the Trump administration has successively launched four rounds of economic relief plans totaling US $ 2.8 trillion, which will increase the federal deficit of US $ 2.1 trillion in fiscal year 2020 and another US $ 600 billion by 2021. In April of this year alone, due to the impact of the first round of economic bailout program funding, US federal government spending surged 161% to 980 billion US dollars, which was 2.5 times that of April last year. However, with the economy in a halt, the US federal government's fiscal revenue for the same period was only 242 billion US dollars, a year-on-year drop of a record 54.8%. As a result, the US federal budget deficit reached a record US $ 738 billion in April. A senior US Treasury official said: "These figures are indeed beyond imagination and shocking, but it just reflects that Congress and the government have provided a lot of assistance in responding to this crisis."
The US economic recession and soaring budget deficits have contributed to the market's panic about the advent of the global era of negative interest rates. Although Fed Chairman Powell has made it clear that he will not consider a negative interest rate plan, saying that the Fed is "not yet exhausted of ammunition," and if necessary, more measures can be taken, but the market does not buy it. Many investors believe that the Fed will implement zero interest rates for the rest of the year, and may even implement negative interest rates in 2021. The price of gold continued to rise last week, once approaching the $ 1760 mark, mainly because the market is expected to spread negative global interest rates.
Want to set up 25 billion "return funds" to attract US companies to return home
In order to prevent the economy from continuing to decline, President Trump recently launched a series of measures to loosen the economy.
On May 19, Trump signed an executive order authorizing the federal government to remove some "unnecessary regulations" that hinder economic development. Trump said: "When millions of people are unemployed because of the epidemic, it is more important than ever to remove these obstacles that destroy American jobs." He revealed that he has instructed various departments to review the hundreds of regulations suspended because of the epidemic. If possible, permanently terminate these regulations and remove obstacles to restart economic activities.
Trump also once again called on American companies to return to the United States to set up factories. According to Reuters, the White House is considering the establishment of a $ 25 billion "return fund" to encourage US companies to move their production chains or key suppliers out of China through tax relief, new regulations, and subsidies. Kevin Hassett, Trump ’s senior economic adviser, said in an interview with Fox Television on May 19 that ensuring the production of key domestic industries is a priority for the Trump team.
In fact, the US government has taken action. The US Biomedical Advanced Research and Development Administration announced on May 19 that it has signed a four-year, US $ 354 million contract with US pharmaceutical company Phlow to increase the production of drugs that may be used to treat new coronaviruses. This is the highest funded contract signed by the US Advanced Research and Development Administration for Biomedicine to date. Navarro, director of the US National Trade Commission, said the cooperation was "a historical turning point in the United States' return of pharmaceutical production and supply chains to China."
However, the President of the American Chamber of Commerce, Thomas Donohue, warned the Trump administration “not to overdo it wishfully” and believed that moving the industry chain from China back to the United States “was costly and laborious”. For important commodities, the cost will also increase. Thomas Donohue also worried that if the US government insists on the principle of "buying American goods" when buying medicines and medical equipment, it will trigger retaliatory measures from other countries and thus affect the import of some important medical supplies by the US
Newspaper Beijing, May 20th
China Youth Daily · China Youth Daily reporter Chen Xiaoru Source: China Youth Daily