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Economists are still calling for another US stimulus package to boost the economy as Americans head into an uncertain fall. But it’s not clear that lawmakers can come to terms after talks stalled last month, especially as the November election nears.
What’s happening: Treasury Secretary Steven Mnuchin told lawmakers on Tuesday that he believes “a bipartisan agreement still should be reached,” and later spoke to Democratic House Speaker Nancy Pelosi. Still, longstanding disagreements remain.
After the call, Pelosi expressed concerns about Mnuchin suggesting a smaller deal in the near term, arguing that economists demand more.
“Sadly, this phone call made clear that Democrats and the White House continue to have serious differences,” she said in a statement.
Clock is ticking: The window for Congress to act is growing smaller as the election nears.
“With the US election under just over [two] months away this could well be the last legislative battle before ballots are cast,” Deutsche Bank’s Jim Reid told clients Wednesday. “A lack of stimulus could result in softer data in the upcoming months.”
The economy is bouncing back, with the Back-to-Normal Index from CNN Business and Moody’s Analytics showing the US economy operating at 79% of where it was in early March. Manufacturing is on track for a “V”-shaped recovery, while retail sales quickly regained ground. But there are concerns that without more government money in Americans’ pockets soon, the comeback could lose steam.
Visa (V) said in a filing on Tuesday that spending on US debit cards grew 24% year-over-year in August. But that’s slightly weaker than the growth it saw in July. The company said this was “partially due to the expiration of the elevated unemployment benefits.”
Remember: Goldman Sachs warned clients that President Donald Trump’s $300 supplemental unemployment benefit, passed by executive order, came “too little too late.” The investment bank argued that the expiration of the $600 weekly supplement to unemployment insurance benefits at the end of July stood to disrupt consumer spending in August.
Goldman’s current forecast is that Congress will implement another $1 trillion in stimulus by late September, pushing total fiscal aid to 17.5% of GDP in 2020. But the bank said that the risk of no additional stimulus until after the election has grown.
Lego sales are surging during the pandemic
Add Lego to the list of companies that have benefited from more time at home.
The Danish toy maker said Wednesday that sales jumped 14% in the first half of 2020 compared to the same period last year. CEO Niels Christiansen pointed to investments in e-commerce as crucial during a period in which retail stores where shut.
Lego’s operating profit rose 11% to $622 million as a result.
Not just Lego: Game makers have been on a tear as social distancing restrictions encourage many people to find new ways to pass the time.
Nintendo’s operating profit surged 428% in its most recent quarter as the Switch console and “Animal Crossing” game continued to drive sales. The company’s shares are up 35% this year.
On the other hand, toy conglomerates like Mattel (MAT) and Hasbro (HAS) have struggled. These companies have cited manufacturing and distribution issues tied to the pandemic as big roadblocks in their most recent quarters.
“We entered the second quarter with extensive retail closures and distribution challenges and had to absorb a full quarter of Covid-19 impact,” Mattel CEO Ynon Kreiz said in a statement in July. Between April and June, the Barbie-maker saw net sales drop 15% compared to 2019.
Hasbro’s stock is down 22% year-to-date, while Mattel is off 18%. The companies are now looking ahead to the holiday season, which they hope can help make up some lost ground.
Someone has faith in Kodak’s turnaround plan
Eastman Kodak (KODK), the photography company that wants to reinvent itself as a drugmaker in the era of Covid-19, has run into trouble in recent weeks — but at least one major investor is expressing confidence in its bold turnaround plan.
D.E. Shaw, a money manager run by billionaire David Shaw, has snapped up a more than 5% stake in Kodak, my CNN Business colleague Paul R. La Monica reports.
Shares of Kodak, which has been popular among retail investors, soared 22% on the news Tuesday. The stock is now up 57% this year.
The Kodak saga: The US government first announced in late July that it would loan Kodak $765 million to help kickstart its pharmaceutical production plans. Kodak’s stock, which was trading at just $2.62 before the news of the loan, soared as high as $60 in a matter of days before pulling back sharply. The stock finished Tuesday trading at $7.30.
The government has since put the loan plans on hold due to allegations of insider trading and concerns that the Securities and Exchange Commission may investigate the stock’s surge — and Kodak has been referenced as an example of excessive speculation in a frothy moment for markets. The investment from D.E. Shaw, however, is a sign that at least some on Wall Street still have faith in the firm.
Also today: The ADP report on private employment in August posts at 8:15 a.m. ET. Economists will scour the data ahead of the official jobs report from the US government on Friday.
Coming tomorrow: Initial US jobless claims are expected to have dropped below 1 million again for the last full week of August.