US - Early signs the bleeding is stopping but the wound has not healed

The number of new COVID-19 cases in the US is moving down but not as expected, although more testing blurs the picture. The jury is still out on whether the US is beginning the reopening too early.

All economic indicators for March and April look terrible but we are seeing some signs of improvement in high-frequency data for May. At least the high-frequency data suggest the bleeding is stopping. There are no signs of a V-shaped recovery (only gradually improving as of today), so the wound is a long way from healing.

One of the positive signs, looking at daily transaction card data, is that US consumption seems to be improving gradually. Another positive is that most job losses are considered to be temporary (unfortunately they may become permanent over time).

The US Congress and the Federal Reserve have done a lot to offset the economic crisis. US public debt as a percentage of GDP has risen 10ppin a very short time due to emergency spending packages (higher unemployment benefits, direct payments to US citizens and loans to companies). The Fed has cut its policy rate and is buying bonds at an unprecedented pace. We do not expect the Fed to raise rates in coming years, according to current market pricing.

While Donald Trump's overall approval rating is pretty stable within the 42.5-45.0% range, his net approval on the handling of the COVID-19 outbreak is minus 10. Looking at the polls, Joe Biden is favourite to win the election. Interestingly, the Republicans are no longer the clear favourites to win the Senate and the probability of a Democratic-controlled US Congress has increased.

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