Question

1) What has happened to expectations of business executives over the past few months? Do the consumer confidence and business executive expectations match? If not, what do you expect business actions will be in the next few months? Think about hiring plans, production plans, inventory levels, and investment in new production or new productivity tools?

2)What has happened to the consumer confidence index in the past few months?

3) what would the Federal Open Market Committee will do at its next meeting? The options are increase interest rate targets, decrease interest rate targets, or keep targets the same. What other actions might they take?

Answer 1

Ques 1

- Current pandemic has impacted many world economies and key impacts of the COVID-19 pandemic on the global economy are that many economies have suffered huge loss in the GDP , no country is spared and most of the global economies are forecasting significant reduction in world output

- Because of current pandemic and due to the lockdown in many countries , many global economies are facing twin shocks of Demand Shock and Supply Shock

- Expectations of business executives over the past few months have been negative and many have revised their corporate guidance for financial performance significantly lower then the guidance before the covid

- Consumer confidence has significantly affected due to job losses and significant impact on earnings of people , high unemployment. Consumer confidence is at lowest in many decades and however business executive confidence has improved a bit after the opening of the economy in parts and stimulus given by the central banks and government. Businesses are cautiously optimistic and their expectations don’t match to consumers.

- Actions in the next few months will be that we can see decline in the GDP nos and expect the unemployment levels to remain elevated.

- Businesses are not hiring much and not raising the inventory levels either. Everyone is putting the capex plans on hold and waiting for the economy to recover. There may be some greenshoots in some pocekts for e.g. in technology space there may be some hiring or some investment but in many other areas people are deferring their buying decisions for non essential goods.

- All this has put downward pressure on demand, and it has significantly been impact.