3 to 9 August: The POTUS stirred the pot by signing executive orders

The start of the third quarter saw global economic activity stabilise and creep back into growth territory again. Undoubtedly the majority of the headline PMIs look better, rising to a strong enough level to push the global aggregate composite PMI back above 50 for the first time since February. Although rising new orders and increasing capacity utilisation provide a sense of comfort and optimism, the flagging employment component suggests there are risks that the recovery could stall. The July jobs market report in the US leads us to the same conclusion: nice headlines, but uglier under the surface, as the unemployment rate got stuck over 10%.

In an attempt to keep the economy going (and also to appeal to voters), President Trump signed four executive orders, which provide additional unemployment benefits (a USD 400 weekly payment, down from USD 600), suspend the collection of payroll taxes, avoid evictions and assist with student-loan payments. At the time of writing, the legality of the President’s executive orders remains unclear, as Democrats argue that Mr. Trump breached congressional spending authority by bypassing Congress, or in other words, what the POTUS did could have been unconstitutional. Furthermore, the executive orders require states to fund 25% of the weekly unemployment payments. However, it is uncertain whether states will be able to meet these obligations.

The global economic diary is packed for the week, which should help further assess the economic damage in 2Q20 (through e.g. the UK’s and the Eurozone’s GDP numbers) and will – hopefully – shed some light on the pace and sustainability of the economic recovery (through e.g. July macro data in the US and China). And if this would not be enough, the continuation of the US-China tensions and the Republican-Democrat clash will also keep investors engaged.

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