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US Economy Savaged By COVID-19

Apr 20 2020, 04:02 PM (BDT) |

The COVID-19 outbreak in America has been one of the biggest humanitarian and economic shocks of the last century. The lock-downs in place around the country have caused massive economic disruption. The economy has essentially been on pause over the last month.

Economy to Re-Open?

Parts of the US are now starting to plan a return to freedom of movement. The aim is to reopen parts of the economy as early as May. Trump has warned over the economic dangers of continuing the lock-downs. This is despite calls from health authorities to keep the stay-at-home orders in place.

The negative impact of the crisis has made itself well-known in recent data points. The March retail sales report showed that spending was down 27% at restaurants, 26% at motor vehicle and parts dealers, 27% at furniture stores and a massive 51% at clothing stores.

Labor Market Decimated

The lock-downs have rocked the labor market. A record number of people are claiming unemployment each week. The main question now is how quickly the US will recover and which parts of the economy have suffered permanent damage. This picture should become clearer once businesses start to reopen.

The main risk to the US economy at this stage is that the drop-off in business investment will provide a headwind to productivity growth into the future. This would create a long-lasting negative impact. Industry projections suggest as much as a 45% hit to GDP in Q2 as a result of the loss of activity.

Risks to the Recovery

In terms of gauging the speed of the recovery, the key will be the extent to which the government is able to balance the need for COVID-19 mitigation policies and the need to re-open the economy. The recovery time will be dramatically improved If a vaccine is established in the near future. However, without a vaccine, there is far more uncertainty in the outlook. This is given the risks of a further re-escalation of the virus’ spread.

Indeed, even once stay-at-home orders are lifted, the reaction of consumers will be key to determining the pace of the recovery. There will likely be a lag in consumer demand given the residual paranoia and fear. This is likely to see restaurants and retail centers experiencing lower levels of custom.

DOW Approaching Key Resistance Level


The recovery in the DOW has seen price rallying off the 18672 level support all the way back up to just shy of testing the broken bullish trend line and technical resistance at the 24624 level. This is a key technical point for the DOW. A break here will open up the way back to 2020 highs. However, if we see some initial selling from the level, bulls will be looking to use a retest of the 22182 level as support.

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