PaymentsJournal
SUBSCRIBE
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
  • Analysts Coverage
  • Truth In Data
  • Podcasts
  • Videos
  • Industry Opinions
  • News
  • Resources
No Result
View All Result
PaymentsJournal
No Result
View All Result

U.S. GDP estimated at -4.8% for First Quarter – But Don’t Panic

Aaron McPherson by Aaron McPherson
May 1, 2020
in Analysts Coverage, Data, Recent News
0
U.S. GDP estimated at -4.8% for First Quarter – But Don’t Panic

red arrow pointing downwards showing crisis

2
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

If you have been sheltering in a bunker, isolated from the outside world, you might have been surprised at Wednesday’s announcement that U.S. Gross Domestic Product (GDP) dropped 4.8% from the same quarter last year.  For the rest of us, it was a dreary confirmation of what we have been seeing since March: unprecedented levels of unemployment, the crash of consumer spending, unprecedented disruptions in the markets.

It will likewise not surprise you that this quarter is certainly going to be much worse, since the major lockdowns occurred in the last month of the quarter, and now we are going to get a full quarter of it.  Nevertheless, some people are panicking, as we can see in this recent commentary from Forbes.com:

The concern among economists is not that the -4.8% figure for Q1 was so large, but that it will seem tiny in comparison to the current quarter that ends on June 30. Oxford Economics expects a “near-40% plunge,” according to a mailing I received, which would be beyond anything the country has seen. CNBC reported in early April JPMorgan expecting that level of decline. The Congressional Budget Office last week came to the same conclusion.

The 4.8% figure today is up significantly from earlier this year. Some economists were telling me then that maybe a 1% drop might happen.

The experts cannot keep up for several reasons:

Forecasters normally use data to make their projections. But things have been changing so quickly that there isn’t enough information, typically gathered by month or quarter, to do the usual mathematics.

Like all people in varying occupations, most are concerned about being too far out of step with their peers. Appearing to be wildly wrong is a career disincentive.

Many work for companies, particularly in the financial services industry, that make money when people invest, whether through fees or commissions or a generally positive consumer atmosphere.

The trends are so historically extreme that anyone might reasonably question whether their estimations could be correct.

Atop unemployment has already crossed the 20% mark, we’re likely in a situation that is worse in many ways than during the Great Depression.

So, the sky is falling, no one can tell you anything because it’s happening too quickly, plus nobody wants to believe it, plus they are all corrupt anyway, so we should assume the worst.  Actually, that’s not enough, because your worst is probably better than the reality.  After all, these analysts probably thought they were predicting the worst.

The problem with this approach is that the word “unprecedented” is being used as a scare word that serves to inhibit action, rather than drive action.  The reality is that unprecedented things happen every day, in the sense that they have never happened before, both good and bad.  You can point to the unprecedented government response just as much as the unprecedented economic downturn.  Governments have a lot of tools today that they didn’t have in 1933, or 2008.

This inhibition effect is revealed by the recommended responses, which are small-scale things that have been already suggested over and over again:

Free up cash as much as you can. Skip offers from companies to send in money and get a better deal or higher volume at improved prices or anything else. The reason they’re doing so is because they want to get as much cash as possible.

One exception to the above is if you and some friends or neighbors need a given type of product or good and might get lower per-item costs by bundling orders through a retailer, wholesaler, or other outlet.

Go through bills and credit card and bank statements and look for monthly charges that you may not realize are still there. (Someone I know cut $120 a month in items that has become forgotten.)

Call service providers of all sorts and ask how to reduce costs. Companies don’t tend to inform you when less expensive options come available because they’d rather continue to take your money.

Ask credit card, mortgage, and other such accounts what they can do for you. It may be nothing or you might be able to negotiate lower fees or rates. In the case of some credit card companies I spoke with, help was limited to putting off a few payments as a one-time action for COVID-19-related issues—good to know if situations get extremely tight, but best to keep in a back pocket for an emergency.

If you’ve got other innovative or clever ideas of how to save money and keep more cash on hand, let me know and I can start an additional list.

That last piece of “advice” is nothing but an admission that the author is so bereft of ideas that he’s asking his readers to come up with them themselves.  Looking over your statements for unwanted charges, and negotiating better deals, is such an old problem that entire companies have been started to help with it.

As for the first suggestion? That is a guaranteed way to ensure that the downturn lasts as long as possible.  Remember that at the other end of those offers and requests are companies with employees who may get laid off.  If they lose their jobs, they won’t spend, and more people will lose their jobs.  Kind of like… a virus, no?

Going through unprecedented times is no excuse to abandon our commitment to our societies and communities.  If you have the means, you absolutely should continue on as best you can.  Millions of individual decisions will either “flatten the curve” or keep it plunging.  This is the turning point; what we do now will have more impact than usual on how things turn out.  There has to be a balance between facing the reality of where we are today and fearing where we may be tomorrow.

Overview provided by Aaron McPherson, VP Research Operations at Mercator Advisory Group.

Tags: CoronavirusForbesGDPJP Morgan
2
SHARES
0
VIEWS
Share on FacebookShare on TwitterShare on LinkedIn

    Analyst Coverage, Payments Data, and News Delivered Daily

    Sign up for the PaymentsJournal Newsletter to get exclusive insight and data from Javelin Strategy & Research analysts and industry professionals.

    Must Reads

    5 Ways to Protect Your Financial Institution from a Cyberattack

    5 Ways to Protect Your Financial Institution from a Cyberattack

    May 26, 2023
    traditional banks

    How Traditional Banks Can Modernize Without Risk

    May 25, 2023
    identity fraud

    Javelin’s Identity Fraud Study Highlights the Changing Nature of Fraud

    May 24, 2023
    SASE, security-as-a-service

    Security-as-a-Service Secures
    Distributed IT Models

    May 23, 2023
    mule. real-time

    Early Detection of Mule Activity Requires Real-Time Solutions

    May 22, 2023
    embedded finance, ecommerce

    How Retailers Can Enter the World of Embedded Finance Confidently 

    May 19, 2023
    cross-border

    Cross-Border Trade is a Cinch with the Right Payments Partner

    May 18, 2023
    debit

    5 Reasons Merchants See Debit As
    Top-of-Mind for In-Store Sales

    May 17, 2023

    Linkedin-in Twitter

    Advertise With Us | About Us | Terms of Use | Privacy Policy | Subscribe
    ©2023 PaymentsJournal.com

    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    Menu
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Videos
    • Industry Opinions
    • Recent News
    • Resources
    Menu
    • Industry Opinions
    • Recent News
    • Resources
    • Analysts Coverage
    • Truth In Data
    • Podcasts
    • Industry Opinions
    • Faster Payments
    • News
    • Jobs
    • Events
    No Result
    View All Result