The economy improved over the last month, but it is clear that momentum is slowing and future growth will likely be more difficult to come by.
In the United States, the rate of new COVID-19 cases has slowed somewhat, which has likely helped to reduce some uncertainty. Manufacturing sentiment moved higher again, Consumers also appear somewhat less concerned about the year ahead, though expectations remain half as favorable as they did at the start of the year. In the United States, the outcome of November’s election will increasingly weigh on sentiment, and uncertainties around another stimulus bill will influence businesses’ investment decisions and Americans’ spending habits.
In Europe, countries began to relax their stay-at-home orders in earnest. Businesses began to reopen as consumers worked toward a new normal. But rising cases of COVID-19 could dampen the recovery. The Organization for Economic Co-operation and Development (OECD) recently “raised” its outlook for the global economy for 2020.
The OECD now says the world economy shrank by 4.5 percent, up from its June forecast of a 6 percent decline. While the economy is doing better than anticipated, it isn’t great.
Economies are extremely fragile right now, and any policy blunders will stymie the recovery. In the United States, there has been talk of additional fiscal stimulus but little movement forward
There is also growing concern that the expiration of some policy measures might push the economy back into contraction. The Euro continues to strengthen against the dollar, which will support U.S. exports but will likely hurt European exports at a time when manufacturers are working to move operating rates higher.
In both the United States and Europe, manufacturing has recovered a significant portion of ground lost to the pandemic, but most sectors remain below prepandemic levels. While manufacturing is expanding, manufacturers remain cautious. This, in turn, is keeping prices firm, but manufacturers are not expanding employment, and inventories remain lean.
Demand is anything but certain, and manufacturers are responding to an uncertain environment by trying to keep costs contained.
The initial recovery brought strong growth rates almost across the board as the economies reopened; however, as growth slows, we are likely to see a divergence in across sectors.
The electronics industry continues to appear to have weathered the pandemic most favorably.
While downstream markets for electronics have been recovering, many are showing signs of slowing growth. The automotive industry was especially hard hit by the pandemic but recovered swiftly.