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IMF Says Pandemic May Skew Economic Data

Key economic indicators may be less accurate due to the coronavirus pandemic, according to the International Monetary Fund. 

“Accurate and timely economic data are crucial for informing policy decisions, especially during a crisis. But the COVID-19 pandemic has disrupted the production of many key statistics,” the fund said in a blog post this week.

The coronavirus disease first emerged in the Chinese city of Wuhan last December. It has since infected around 5.8 million people and killed more than 360,000 globally, according to data compiled by Johns Hopkins University.

“Without reliable data, policymakers cannot assess how badly the pandemic is hurting people and the economy, nor can they properly monitor the recovery,” wrote the three members of the IMF’s statistics department.

The blog post comes at a time when many countries are releasing data on gross domestic product for the first three months of the year — when the coronavirus first started to spread globally. GDP is a broad measure of the size of an economy and is a widely watched indicator by governments, central banks and investors.

In the U.S. — the world’s largest economy — the White House and Congress use GDP data to plan spending and tax policies. The Federal Reserve also considers GDP numbers when setting monetary policy, according to the country’s Bureau of Economic Analysis.

“Business people use these stats when making decisions about jobs, expansion, investments, and more,” the BEA said on its website.

This week, several countries are scheduled to release their GDP data, including India, France, Italy, Canada and Brazil.

One crucial hurdle in producing reliable and timely economic statistics during the pandemic is the lockdown measures that have kept the staff of national statistical offices at home.

“For example, the calculation of retail prices often requires physical visits to stores but this is currently not possible in many countries,” the fund explained.

“Similarly, surveying businesses about their production and investment plans is difficult as many have temporarily shut down or simply do not have the resources to respond to statistical questionnaires.”

Such disruptions would cause data on prices and production — which are critical for monetary policy and fiscal stimulus decisions — to be delayed or estimated based on partial information.

“The significant data disruptions due to the COVID-19 pandemic require innovative data collection methods and data sources,” the IMF said.

“More accurate and real-time information will help countries continue to respond more effectively to the crisis and start planning for the recovery.”

Bannister Sees the S&P 500 Up Another 7%

“We now raise our S&P 500 price target to 3,250 by Aug. 30, 2020 (in 3 months), supported by economic survey data improving/bottoming (consumer, services, industrial) and our expectation that the S&P 500 [price/earnings ratio] expands (at prevailing low real bond yields) to offset weak [earnings per share] typical of late-stage recession periods,” wrote Barry Bannister, chief institutional equity strategist at Stifel, in a Wednesday note.

That would mark a 7% rise from the S&P 500’s close at 3,036.13 on Wednesday. Stocks jumped, with the large-cap benchmark advancing 44.36 points, or 1.5%. The Dow ended Wednesday with a gain of 553.16 points, or 2.2%, at 25,548.27, while the Nasdaq Composite Index advanced 72.14 points, or 0.8%, finishing at 9,412.36.

The gains saw the S&P 500, which fell 34% from Feb. 19 to March 23, finish just 10.3% away from its all-time high. The S&P 500 and Dow closed at their best levels since early March, while the Nasdaq saw its highest close since Feb. 20.

Stocks traded at records in February, then tumbled into a bear market at breakneck speed thanks to the COVID-19 pandemic. Stocks set at least a near-term bottom on March 23, with the S&P 500 closing 33.9% below its Feb. 19 record high at 3,386.15.

Bannister previously acknowledged being initially “blindsided” by the pandemic but called on March 19 for a stock-market rebound that would see the S&P 500 rally back to 2,750 by April 30.

On April 18, as the index hit his mark, he raised that target to 2,950, but warned that gains beyond that level could be difficult to come by. On April 30, he left his target unchanged, arguing it would likely take another shock, inducing the Federal Reserve to step in with additional stimulus.

In his Wednesday note, Bannister said that after a month of roughly sideways action, the degree of monetary stimulus by the Federal Reserve and fiscal measures by the government have proven crucial to keeping the market supported. And the recent surge for stocks may signal a positive inflection for gross domestic product in the third quarter, which could boost earnings per share, or EPS, in 2021.

Market Wrap

The Dow fell 147.63 points on Thurday, or 0.58%, to close at 25,400.64. The S&P 500 dipped 0.21% to 3,029.73. The Nasdaq Composite went down by 0.46% to 9,368.99. Stocks closed lower after President Donald Trump said he would hold a news conference regarding China on Friday. 

Trump’s announcement came after China’s National People’s Congress approved a national security bill for Hong Kong. The bill will bypass Hong Kong’s legislature, raising concerns over the longevity of Hong Kong’s “one party, two systems” principle, which allows additional freedoms mainland China does not have.

That announcement sent stocks tumbling in the final hour of trading. Stocks had traded higher for most of the session as the latest unemployment data signaled the worst of the economic damage from the coronavirus pandemic may be over. 

Bank stocks fell broadly on Thursday, giving back some of their strong gains for the week. Citigroup fell 5.93% while JPMorgan Chase slid 1.49% and Bank of America dropped 4.31%. 

International trade numbers, along with personal income data, are set for release Friday. Federal Reserve Chairman Jerome Powell is also scheduled to speak.

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