Supply Side Economics Will Lead The Recovery?

Supply side economists, and most of sell-side bank analysts appear to be such, are disseminating the idea of supply side recovery. For example, Danske Bank has a following outlook:

We look for further improvement in PMI data in the coming months whereas some of the leading indicators that have risen the most are likely to level off soon from the very high levels. Global GDP growth looks set for a strong H2 recovery.

Click on charts, courtesy of Danske Bank.


Indeed, production will create at least a new inventory that can be sold, that, in turn, improves the GDP statistics as a growth ...

However, the economists at Nomura comment the US consumer spending (they have been responsible for ca. 25% of global consumption):

Nominal personal income declined by 1.3% in June, reversing an equivalent increase in May (Consensus: -1.0%). Last month income growth was boosted by stimulus-related government transfers, and the decline in the current month reflects the absence of those one-time payments. Underlying measures of labor compensation growth remained weak due to soft wage growth, layoffs and furloughs. Nominal wage and salary income fell by 0.4% m-o-m and is now down 4.7% y-o-y. Real disposable (after tax) income fell by 1.8% during the month.

Real personal consumption expenditures (PCE) fell by 0.1% m-o-m and have not increased since February. Despite recent strength in housing and industrial sector activity, consumer spending has shown few signs of a rebound. We continue to expect it to lag as the broader economy emerges from recession. The personal savings rate fell to 4.6% from 6.2% previously.

Who is going to buy the stuff?

Even saltwater economists see one postmodern recovery!

Governments are going forward with stimulus and spending programs, China will push with further consumer stimulus... Total debt to income keeps growing?