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DE | Sinai Economic and Market Perspectives | Worst Over? Beginning of Better? Earnings Stunning! – 02/23/21
Worst Over? Beginning of Better? Earnings Stunning!
Here-and-Now (Main St. Gloom) and Wall St. Cheer (Looking Ahead)
Widespread weakness was shown in the January Employment Report, underscoring a big slide down in growth for the U.S. Economy exiting 2020 and entering 2021.
Slowdown? Yes! Recession? No! Better coming? Yes!
Retail Sales popped up (5.3%) in January, however, reflecting stimulus from the late December $908 billion Relief Bill. Industrial Production rose nicely, 0.9%, a positive surprise, but still in-line with the generally weak exit of the Economy from 2020 and beginning 2021.
And, a possible drop in Aggregate Consumption, inflation-adjusted, for Q1-2021 suggests at the least a weaker quarter for Real GDP than the 4% of Q4-2020.
Even if a negative Q1 were to happen—that would not mean a Recession! One quarter of declining Real GDP doesn’t do it—at least two negative quarters and three-to-five months of declines in certain key high-frequency monthly indicators are required.
So, there was a Here-and-Now deterioration, striking in the Employment Report and previous downward revisions—with still an “Army of Unemployed”—“Main Street” Gloom even as the Equity Market (Wall St. Cheer) was reaching new highs.
But, the beginnings of a better future for the economy seem to be emerging—a Slowdown but not “Double-Dip,” continuing Recovery and then Expansion. This remains the DE Basic Prospect (Odds 65%).
The numbers on the Pandemic are improving significantly, although still high, and there is a step up in the pace of vaccinations, slow but gathering steam.
Some reversals of the Restrictions and Shutdowns of Q4 and into early 2021 are in-process, providing an Exogenous Lift to business activity.