Aug 5 (Reuters) - The U.S. coronavirus relief bill currently under debate is likely to come in at about $1.5 trillion and will be aimed at sustaining current levels of economic activity rather than boosting them, TS Lombard Chief U.S. Economist Steven Blitz said.
Blitz told the Reuters Global Markets Forum on Wednesday that better U.S. wage and employment data recently mean the bill could be less than earlier stimulus, and U.S. lawmakers will bridge their differences to reach a compromise.
Below are edited excerpts from the chat, click here refini.tv/2ELbm95 for the full transcript:
Q: What do you expect from the stimulus package and that translating into consumer spending?
A: The package will come in at around $1.5 trillion and will not be a boost to spending, but more of an attempt to sustain current levels of activity.
Compared to April, employment and wage income is higher so it makes sense that the package could be smaller, but there are still around 30 million collecting some form of unemployment insurance, so ending the $600 per week top-up would be a problem.
I do not see any real chance of the package failing, and expect it to be signed next week with the various programs probably expiring early next year, probably Jan. 31.
Q: What is your view on the recovery trajectory, and how do you see markets reacting if it doesn’t go as promised?
A: The economic data is split between indicating the return of activity as various states reopen, or shut down (ADP data), which is all to the positive, but the data do not indicate how far the reopening goes - that is what’s the cap on activity.
My sense is it will fall well short of pre-March levels and leave the economy in a severe recessionary environment. Key number on Friday will be the number of unemployed citing permanent job losses.
Q: What are your thoughts on Joe Biden’s economic plan announced last week?
A: I think all these plans are more about politics than policy. Of course a Democrat will be more disposed to a green agenda, higher taxes on higher income, etc, but the political message is to get young progressive members of the party enthused to vote and at the same time, reel in the middle-skill, middle-income worker that gave Trump his majority in Pennsylvania, Michigan and Wisconsin. (This interview was conducted in the Reuters Global Markets Forum, a chat room hosted on the Refinitiv Messenger platform. Sign up here to join GMF: refini.tv/2LbSKPl) (Reporting by Aaron Saldanha and Lisa Mattackal in Bengaluru, Divya Chowdhury in Mumbai; Editing by Shounak Dasgupta)
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