Question

Compare in a paragraph before and after Covid-19 situation in terms of performance of the Sector

1. Retail Trade

• The Analysis can be Country-specific or Global.
• Page Limit: 3-4
• Tables, Graphs & Charts should be used to report findings.

Answer 1

Pre Covid Macroeconomic Analysis of USA

Spike in inflation last year was accustomed due to higher energy prices of crude oil and higher demand and spending which crossed inflation in CPi terms to 2.3percent.

The unemployment in 2019 has remained at 3.93 percent to 3.78 percent range and has decreased gradually due to higher capital expenditure by corporates after drastically cut downs of taxes which caused headroom inflation to spike and shoot.

As of 2019 end, the Fed funds rate remains at 1.7 percent and 10 year treasury yields at 1.8 percent and 30 year treasury yields at 2.07 percent. The chnages are exacerbated by anticipation of recession such that returns are higher in near term as risk is higher amd the economy looks to revive post 10 years which has caused yields to dip for 10 year and 30 years.

The yield curve has inverted which is strong indicator of recession as probability in near term as 5 year treasury yields are higher than 10 year and 30 years and hence long term view is stable but short term indicates slowdown.

Federal funds rate remains constant in anticipation of prevention of further inflation and st same time balancing counter effects of trade war so rise in funds rate can bring slowdown sooner however cut in rates can boost inflation levels and hence Fed maintain neutral stance.

Current primary concern of The US Fed is to monitor inflation as unemployment has been projected at 3.5 per cent however the negative implications of US china trade war and global uncertainty makes the Fed dovish but spiking inflation causes it to be hawkish amd thus is in tradeoff situation.

Post Covid Macroeconomic Analysis of USA

Since oil prices go negative, the US wTi crude oil prices remain unattractive as storage costs get higher and supply remains higher because oil plants cannot be closed and thus US economy receives almost zero prices on selling in short run and economic growth deepdives as unemployment toonrises because of low revenues and low forex reserves.

Coronavirus has had huge impact on economic growth due to lockdown and shutdowns and social welfare losses.

The economic growth remains subdued as Aggregate demand and consumption both fall simultaneously also leading to fall in prices and inflation.

Investment is pumped out due to falling interest rate regime and lower economic outlook of companies.

Government spending is ramped up due to an expansionary fiscal policy by reducing taxes and spending. Also net exports go negative as imports surge due to supply shocks.

Negative growth in GDP causes high unemployment and lower inflation based on Philips curve movement.

Thus in short run, aggregate supply is high but aggregate demand is low and real GDP falls. However in long run the economy stabilises.

The US has been great in fiscal stimulus of 484 billion dollars and US Fed unlimited bonds buying programmes worth 2 trillion dollars with rate cuts, CRR and SLR and liquidity coverage ratio cuts. Triggering automotic stabilizers and combined above policy will help alleviates financial distress and grow economic growth throufh higher consumption and disposable incomes.

The supply of credit availability rises causing its demand to go down considerably.

Sijce the interest rates are cut, the banks shall transmit easier loans availability at lower rates and thus loan markets will grow enormously.

However the cases has risen to 1 million approximately and states have been relaxed and thus caused havoc.

To avert this crisis, US must impose lockdown and gradually open economy using partial lockdown only after 2 months of complete lockdown. Major boost towards creating vaccination and healthcare for curing patients is required

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