Tags: lockdowns | consumer | goods | electronicus | furnishings

Sales of Electronics, Furnishings Will Soar on Pent-Up Consumer Demand

Sales of Electronics, Furnishings Will Soar on Pent-Up Consumer Demand

By    |   Monday, 27 July 2020 09:56 AM

The fiscal stimulus debates are back and hopefully we’ll get a broad-based politically acceptable proposal, but in all honesty, I have serious doubts.

The sticking point is if the Senate will provide hazard pay for essential workers, according to Forbes.com.

There is something of a sense of urgency about this as the extended unemployment benefits are due to expire in four days on July 31.

There is a risk to the U.S. economy, which is of course important, if these benefits are ended without some alternative and this is a negative that weighs on the dollar that continues on its weaker trend.

In the meantime, the economic impact of the COVID-19 virus has always been about fear:

  • Fear of the virus is an obvious impact on behavior.
  • Fear of unemployment is another concern however, which can change saving and spending behavior.

Now, a bounce back in economic activity has been built on forced savings of lockdowns being spent when lockdowns end. If people who are not unemployed now become more fearful of the economic consequences of possible unemployment in the future, they may choose to hold on to those savings as a precaution or, if you want, an insurance policy. That would slow the pace of economic recovery.

We got some hints on the way forced savings have been spent already with “positive” durable goods data that just have been released.

When lockdowns ease, the forced savings that are being spent, will likely used to purchase consumer durable goods like electronics, home furnishing, and so on.

Consumption was always likely to recover before production and as consumers are unable or unwilling to spend as much on services, durable goods are the beneficiary.

New orders for manufactured durable goods rose 7.3 percent month-over-month in June of 2020, following a 15.1 percent jump in May and beating market forecasts of 7 percent. Demand for transportation equipment jumped 20 percent, mainly due to motor vehicles and parts (85.7 percent) while defense aircrafts and parts plunged 30.6 percent. Excluding transportation, new orders increased 3.3 percent and excluding defense, new orders increased 9.2 percent.

Orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, jumped 3.3 percent after a 1.6 percent gain in May. Economists polled by Reuters had forecast core capital goods orders advancing 2.3 percent in June.

Overall, these are good numbers, but, please remember: We aren’t out of the woods yet.

From the Euro Area, we just got the M3 Money Supply data that increased further by 9.2 percent year-on-year in June and was up from 8.9 percent in May.

This was expected as the European Central Banks (ECB) continues to provide lots of liquidity, as in fact does the Federal Reserve.

The M3 Money Supply measures the change in the total quantity of domestic currency in circulation and deposited in banks. An increasing supply of money leads to additional spending, which in turn should lead to higher inflation, but that is actually still not the case in the Euro area.

From Germany, which is by the way the fourth economic power in the world after the U.S., China and Japan, we just got the release of the German ifo Business Climate Index, which shows that sentiment among German companies has improved further. The ifo Business Climate Index rose from 86.3 points (seasonally adjusted) in June to 90.5 points in July. This is the third rise in a row. The upswing continued in trade, too. Companies are also carefully optimistic about the coming months, Reuters explained.

Finally, for investors it might be good to keep in mind, especially for those who have the intention to invest in euro denominated instruments, what the German Central bank Jens Weidman said on Sunday about the EU's coronavirus rescue package that has supported the recent rise of the euro by calling for greater oversight of how the funds are used.

“I consider joint debt for wide-ranging transfers to be fundamentally dubious and the rescue package should not be used as a springboard to large-scale EU debt becoming a regular form of budget financing,” Jens Weidman said, according to Deutsche Welle.

"Hans" Parisis is a bank economist who has advised investors on financial markets and international investments.

© 2020 Newsmax Finance. All rights reserved.

1Like our page
When lockdowns ease, the forced savings that are being spent, will likely used to purchase consumer durable goods like electronics, home furnishing, and so on.
lockdowns, consumer, goods, electronicus, furnishings
Monday, 27 July 2020 09:56 AM
Newsmax Media, Inc.
Newsmax TV Live

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

© Newsmax Media, Inc.
All Rights Reserved