Key Takeaways

  • A drop in consumer spending after a recent surge in cases threatens recovery
  • Small businesses are pulling back their expansion plans
  • Hopes of a V-shaped recovery are fading

It's like they say – when America sneezes, the world catches a cold. The world's largest economy is hitting new all-time-high records in daily coronavirus cases is a worry for the U.S. and to some degree the rest of the world. 

cases
Source: Our World in Data.

Economists at Jefferies warned this week that their U.S. economic activity index has "flat-lined" and "has now been moving sideways for the past three weeks." Below are two charts we found showing dips in activity as outbreaks continue. First is a chart of recent Homebase data, and the second is Apple's mobility trends data published daily.

Renaissance Macro Research
Source: Renaissance Macro Research.

You'll notice requests for driving and walking directions are slowing after a dramatic rise since April.

activity
Source: Apple.

This is taking place just as the small-business outlook was on the way to rebounding from historic lows in April. A national survey of 630 owners between June 16-23 showed two-in-three businesses were experiencing reduced customer demand, down from 80% in April. While the majority (69%) said they are very concerned about the coronavirus, that number is down from 85% two months ago. 

Of course data is never a complete picture and can be interpreted in different ways, plus there may be seasonal factors at play. Bulls have been focusing on deaths trending lower, while bears are focused on the number of cases spiking. Fundstrat's buliish Thomas Lee is suggesting cases have already peaked in states like Texas and Arkansas. There's also the argument that ramped up testing, which will help reduce the severity of the outbreak, is responsible for confirmed cases moving in the wrong direction. There are no easy answers, yet. The proof will be in the economic data pudding to come.

The number one way experts are hoping the U.S. will pull out of this is not a magical cure anymore, but masks. St. Louis Fed President James Bullard told CNBC he anticipates that the renewed health scare will make mask-wearing "ubiquitous.""If we get to that situation, we’ll have the disease under control," he said. "What I like about that scenario is it does not rely on a vaccine coming or a therapeutic coming. We can use simple, easy technology that we have today, get a good situation, get most of the production back to normal." Bank of America recently cited an Institute for Health Metrics and Evaluation study that said universal usage of masks can prevent 45,000 deaths this fall.