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Trump claims a lead in global rebound with cherry-picked data


Jordan Fabian, Steve Matthews and Olivia Rockeman  |  Bloomberg

President Donald Trump says America is leading the global economic and financial market recovery. Others contest that claim, while the data – as usual – depend on how you parse them.

“Our economy is performing significantly better than Europe – which people have to understand very strongly,” Trump said at a press briefing Wednesday. “We’re working with Europe on their difficulties, and we are going to help them all the way.”

Trump’s comments came just hours after two senior Federal Reserve officials lamented that the U.S.’s failure to contain the coronavirus put the nation at risk of a prolonged economic downturn. They contrasted the situation to Europe, where they said a more forceful response to the pandemic has positioned countries for a quicker comeback.

Data show Europe’s stronger lockdowns likely contributed to its bigger GDP decline earlier, but may be helping it more recently. Indicators such as credit-card use, travel and location information show euro-area economies such as Germany, France, and Italy, along with Norway and Japan, are closest to their pre-pandemic readings, while Spain is falling behind slightly, according to Bloomberg Economics. The U.K., U.S. and Canada are still far below their levels of activity at the start of the year.

And most economists say that while U.S. spending and jobs rose sharply in May and early June, activity has since flattened out, suggesting a longer slog of a recovery.

“Europe went down harder and is now bouncing stronger,” said Bruce Kasman chief economist and head of global economic research at JPMorgan Chase & Co. “Ultimately we think Europe does better because of its handling of the virus.”

Boston Fed President Eric Rosengren is among those that have picked up on that trend. “Visits by Europeans to retail and recreation locations have now experienced a more robust recovery compared with American visits to such locations and are close to their pre-pandemic levels,” he said Wednesday.

Stock Market Performance

Dallas Fed President Robert Kaplan also flagged that other countries “are recovering at a very rapid rate” after pulling down their infection rates.

Asked about those comments, Trump blamed Democratic governors for failing to open up their states as causing a “headwind” for the economy. “They just want to keep these people in their houses, in their prisons,” he said.

Trump also touted America’s stock market performance.

“The United States is leading the world very substantially” when it comes to the rebound in equities in recent months, He said since March America’s stock-market capitalization has risen by $9 trillion, “a number that nobody’s ever heard of before.”

Actually, it’s up more than $12 trillion from the bottom in March, according to data compiled by Bloomberg. But the S&P 500 Index has underperformed by some measures over the past two months, since the spread of the coronavirus accelerated in the U.S. Its 11% gain is behind the 14% rise in the Shanghai Composite, and in line with the Euro Stoxx 600 in dollar terms.

“The stock market’s rebound signals a V-shaped recovery,” Trump said.

The president made his case with charts, trumpeting “the shallowest contraction, which is a big deal” in the economy.

That depends on how it’s measured, however. U.S. gross domestic product shrank 9.5% in the second quarter from a year before, against a 15% slide in the euro region. But some of that outperformance owes to stronger growth in the second half of 2019, rather than superior handling of Covid-19. The U.S. slide on an annualized basis was 32.9%, the worst reading in a data series going back to the 1940s. Meantime, China’s GDP rose last quarter.

Trump also highlighted a rebound in homebuilding, auto sales and manufacturing, along with employment.

Indeed, most measures of housing have shown “v shaped recoveries,” Michael Feroli, a colleague of Kasman’s at JPMorgan, wrote recently. But credit-card spending data have been softening, likely due to the resurgence in Covid-19, he also said.

The expiry of supplementary unemployment benefits in July also threatens to undermine a rebound in spending. While Trump has signed executive orders offering some relief, economists say it’s no replacement for another broad fiscal package of at least $1 trillion – over which Republicans and Democrats are deadlocked.

“If this is all we get for fiscal policy for the rest of the year it would represent a significant downside risk to our growth outlook,” Feroli said.