Economists are hoping for another stimulus package to boost the US economy. However, it may not happen shortly as the country heads to elections in November. Lawmakers were not able to come to terms as talks were stalled last month. Treasury Secretary Steven Mnuchin interacted with lawmakers and said that a bipartisan agreement should be reached considering the gravity of the situation. He also spoke to Democratic House Speaker Nancy Pelosi. Even after all these talks, there is no agreement on any issue.
After the meeting, Pelosi expressed concerns that Mnuchin was suggesting a small package in the near future. However, economists are expecting a big package as the country is heading into an uncertain fall due to the ongoing pandemic. Jim Reid of Deutsche Bank said that this could be the last legislative battle before the upcoming elections and also warned that not providing adequate stimulus could lead to softer data for the next few months.
As per data from leading rating agencies, the economy is bouncing back with good speed in recent months. It is operating at 79% of where it was before the pandemic struck the country. The manufacturing sector is doing well and is headed for a V-shaped recovery. Similarly, sales and retail data are also encouraging in recent months. However, economists feel that without proper stimulus coming from the government at the right time, Americans may hesitate to spend, and this can slow down the economy soon.
In a filing on Tuesday, Visa said that the US spending on debit cards grew by a decent 24% in August, considering the YOY growth. The figures were slightly lower than what came in July, and this was attributed to the expiration of unemployment benefits. Commenting on the current economic situation, Goldman Sachs warned that the $300 unemployment benefit offered by the Trump administration came a little too late, and it was also lesser than what most economists were expecting from the government. The Trump administration had earlier provided a $600 weekly supplement towards unemployment insurance benefits that ended in July. This has disrupted the consumer spending in the month of August, and it will continue to show its effects in the next few months.
Goldman Sachs expects the government to provide another $1 trillion in stimulus before October, and this will push the total financial aid to 17.5% of GDP this year. However, the risk of no stimulus coming from the government has also increased in recent weeks, considering the disagreement between lawmakers. Lego is one company that is benefitting from the ongoing pandemic. The Danish toymaker said that sales have jumped 14% in the first half of this year compared to the same period the previous year. The officials pointed to investments in the eCommerce sector as critical as many retail outlets were shut across the country due to the pandemic.
This has been the trend with other game makers as well as the lockdown restrictions have pushed many people indoors in recent months. Many people who are stuck at home for a long duration are now looking forward to such games to entertain themselves during the pandemic. Apart from that, the schools have remained closed since March, and this has increased the sales of such gaming devices. Kids are making the best use of their free time by enjoying such games. This trend may continue for the next few months, considering the rate at which the pandemic is growing across the country.
Even Nintendo is doing good business in recent months as its operating profit surged 428% in the last quarter. Even the share price of Nintendo was up by nearly 35% in 2020. However, Mattel and Hasbro have struggled in recent months, and the companies have cited distribution problems due to the lockdown situation in most parts of the country. Mattel CEO Ynon Kreiz said that they entered the second quarter with extensive retail closures, and the distribution hurdles led to a full quarter impact on the business. The sales of the company dropped by nearly 15% on a YOY basis.
The stock of Hasbro was down 22% YOD, and Mattel was down 18% during the same period. However, they are hoping that the upcoming holiday season will boost the sales of their products. David Shaw has picked up more than a 5% stake in Kodak as he sees some hope in its turnaround plan. The photography company is now planning to reinvent itself as a drugmaker, and there are good prospects due to the ongoing pandemic. However, its attempts face some troubles as everything is not falling in place due to allegations of insider trading during the recent months.
After the announcement of the stake picked up by David Shaw, the stock saw some excitement, and it soared nearly 22% on Tuesday. On the whole, the stock has gained nearly 57% in 2020. In late July, Kodak got assurance from the US government regarding a loan of $765 million to boost its pharmaceutical production plans. The stock that was trading at around $2.62 soared to nearly $60 within a few days. However, it could not sustain the rise and fell sharply later. As of Tuesday, the stock is trading at $7.30.
The government took notice of the sharp movement and put the loan plans on hold as it expects that the Securities and Exchange Commission may order an investigation to look into the surge in stock price. However, the recent investment by DE Shaw has boosted the confidence of investors. The overall economic situation across the country is not too good as the government is not able to provide timely stimulus due to the upcoming elections. In this situation, the common people will have to wait for another 4 months to see some positive news about the stimulus. Economists worry that it may be too late to prevent the economy from going into a slump. It would be interesting to see how the government reacts to the situation in this election season.