US second quarter contracted slightly less than analysts feared, but at a record breaking pace nonetheless. Falling at an annualised basis of 32.9% over the quarter (against forecasts of a 35% drop) isn’t something to be proud of; this is the consequence of the Covid-19 wrecking ball, and there are no ways you can put lipstick on this particular pig to make it look at all attractive. Coupled with this GDP release, we saw continuing US jobless claims ticking up higher on the week for the second time running, with 1.43 million Americans filing for jobless benefits.
US GDP for the second quarter is old news – almost everyone apart from Trump expected it to be horrendous, and it truly was, as it captured the worst months of lockdown. The more worrying trend is the continual persistence of US jobless claims, which appear to have plateaued for now, and that poses threats to any hope of a sharp V-shaped recovery. The good news is that Congress will almost certainly over-deliver on further fiscal stimulus, and markets can at least take some comfort from that. Overall, until we get a handle on the virus outbreak (through either better control of the regional outbreaks or vaccine success), economies will likely continue to be stuck in a sub-optimal funk.