Comments from the Dallas Fed President
The headline from Kaplan in the WSJ just now is about overshooting on inflation down the road but the potentially market moving news is that he's highlighting a slowing in high frequency data.
My views on the second quarter contraction, the size of it, are about the same-about 35% annualized. I have been of the view that the economy probably bottomed in April. We were starting to grow in May. We were going to grow in June, July, and from here for the rest of the year. And we would have a rebound from the second quarter. If you had asked me probably earlier in June, I was pleasantly surprised with the strength of the rebound, and I was getting more optimistic about the rebound. And then we had the resurgence in cases, and we started to see a change in the high frequency data, particularly the mobility data we track. We have a mobility and engagement index. We started to see that starting to stall out around the middle of June.
It's our sense from a wide range of conversations with businesses and looking at the high frequency data that we're growing at a slower rate than I had hoped. And that's directly related to the resurgence of the virus. People are more reluctant to broadly engage in a wide range of activities, whether that's going out to dinner or other things that they might be doing. It's not that they're not spending, by the way. They're just going to spend in different ways.
But the impact of the resurgence is-there were a whole range of small businesses that I talked to who took the [Paycheck Protection Program loans], brought their employees back, reopened, were seeing improvements in their business, were optimistic about making it; and the PPP loans, they got them converted to grants. And now they're seeing their businesses slow again, and for some-depending on what they do-slow substantially. And they're much more concerned whether they are in fact going to make it. So the jury is now very much out for many of them because they're not well equipped for another slow down.
