Perspectives

Change of scenery

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Eco Perspectives // 1 quarter 2021  
economic-research.bnpparibas.com  
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UNITED STATES  
CHANGE OF SCENERY  
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The 46 president of the United States, Joe Biden, will face a difficult mandate. At the time of his inauguration on 20  
January 2021, he will inherit a sluggish economy, as the Covid-19 pandemic continued to worsen with a human toll of  
tragic proportions. Looking beyond the health crisis, the new Democratic administration will have to act on political  
and social stages that have never seemed so antagonistic at the dawn of a new decade. With his reputation as a man  
of dialogue, Joe Biden will need all of his long political experience and skills in the art of compromise to try to heal  
America’s divisions.  
Though not the landslide the polls predicted, Joe Biden’s victory was  
nonetheless decisive: with 81.3 million popular votes (51.4% of votes  
cast) and 306 electoral votes out of a total of 538, the Democrat  
GROWTH AND INFLATION (%)  
th  
GDP Growth  
Forecast  
Inflation  
candidate won the 3 November election and was elected the 46  
president of the United States. His term will begin with his inauguration  
on 20 January 2021. Kamala Harris will be the first woman to become  
Vice-President.  
Forecast  
3.7  
4
3
2
1
0
1
2
3
3.2  
2.2  
1
.8  
1.9  
1.9  
1.3  
WHAT MANOEUVRING ROOM FOR PRESIDENT BIDEN?  
And then what? President Biden’s ability to get things done will depend  
on the balance of power in Congress. The elections did not spark the  
-
-
-
Blue Wave” that the Democrats were hoping for: according to the vote  
count as of 6 December, the Democratic Party barely held on to their  
majority in the House of Representatives (222 seats, just above the  
minimum threshold of 218 seats), while the Republicans gained 10  
seats. All eyes are now focused on the Senate, whose support is vital  
for the passage of laws and treaties and for confirming nominations  
to key positions (including Supreme Court justices, Federal Judges and  
the Attorney General). So far, the Republican Party has clung to 50  
seats while the Democrats have won 48. The two remaining seats are  
both in the State of Georgia. Since none of the candidates managed to  
obtain the required 50% of the vote during the general election, a runoff  
election will be held on 5 January 2021. If the Democrats win both  
seats, the Senate would be split equally with 50 seats for each party, in  
which case the Vice-President, Kamala Harris, who is also president of  
the Senate according to the Constitution, would cast the tie-breaking  
vote. A lot of US government policy in the years ahead will depend on  
which way Georgia votes on 5 January.  
-4  
-
3.6  
-
5
2
019  
2020  
2021  
2022  
2019  
2020  
2021  
2022  
CHART 1  
SOURCE: BNP PARIBAS GLOBAL MARKETS  
ELECTION RESULTS OF NOVEMBER 3, 2020  
PRESIDENTIAL  
ELECTORAL COLLEGE: 538  
306  
2
32  
President-elect Biden has made some bold proposals, from healthcare  
(
strengthen Obamacare, provide easier access to Medicare and  
Medicaid, introduce universal healthcare for children, Federal  
subsidies for private insurance policies...) to labour conditions (raise  
the Federal minimum hourly wage from USD 7.50 to USD 15; improve  
the status of the self-employed, double Federal funding for the State  
Small Business Credit Initiative...) and education (increase the number  
of scholarships, free education through community college for students  
from low-income households, student loan forgiveness after 20 years  
of repayments...), but there is very little chance these measures would  
be adopted if there is a Republican majority in the Senate. Even within  
the Democratic camp, these proposals would be subject to compromise.  
In other areas, however, President Biden will have greater manoeuvring  
room, especially in foreign affairs, where he is likely to act through  
presidential decrees.  
BIDEN TRUMP  
> BIDEN PRESIDENT-ELECT  
HOUSE of REPRESENTATIVES  
SENATE  
SEATS: 435  
SEATS: 100  
2
22  
211  
48  
50  
DEMOCRATS  
REPUBLICANS  
DEMOCRATS  
REPUBLICANS  
>
DEMOCRAT MAJORITY  
> PENDING ISSUE  
2 SEATS TO ALLOW  
The United States will re-join the Paris Climate Agreement, which is  
not a treaty and thus does not require Senate approval. This is one  
example from Biden’s list of campaign promises that will be met.  
There could also be some bipartisan support for industrial policies  
8
SEATS TO ALLOW  
CHART 2  
SOURCE: ASSOCIATED PRESS  
(
stricter place-of-origin rules to qualify as “made in America”; Federal  
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Eco Perspectives // 1 quarter 2021  
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purchases of American products; greater investment in research and  
development) and infrastructure investment (road repairs, high-speed  
internet services, encouraging the development of rail and public  
transportation).  
MONITORING PRIVATE CONSUMPTION  
From artificial intelligence to e-commerce, social networks and video  
conferencing, the digital revolution has accelerated in all its forms  
during the Covid-19 crisis. Faced with the need to track the pande-  
mic, new tools have been developed to measure consumer behaviour  
that draw on “big data”. Google, the internet search engine, issues  
daily Mobility Reports for all regions of the world based on the use of  
its apps, such as Google Maps. Whereas for national institutions, the  
production of statistics has been disrupted by the pandemic, these  
online tools have proven to be very useful for estimating the loss of  
production attributable to social distancing and/or lockdown restric-  
tions. In France, there seems to be a strong correlation with econo-  
HEALTH EMERGENCY AND THE ECONOMIC CRISIS  
The immediate priority for the Biden administration will be to fight the  
pandemic, after an alarming resurgence that threatens to worsen an  
already dire human toll (nearly 300,000 deaths) and social-economic  
disaster (nearly 10 million jobs have already been destroyed). As we  
were going to press, the number of new Covid-19 cases, aggravated by  
the Thanksgiving holiday, had already risen to an all-time high, with  
1
75,000 new cases daily, or nearly 53 new cases per 100,000 inhabi-  
1
tants. This is twice as high as in Europe . Initially hitting the more rural  
states (North Dakota, Indiana, Kansas, Utah and Colorado), the second  
wave of the pandemic has returned to the big metropolitan areas.  
1
mic activity (Insee, 2020 ). The same observation can be made for the  
United States, where private consumption trends, usually available on  
a monthly basis, can be analysed using the search engines’ mobility  
reports. Based on an principal component analysis, the six destination  
criteria used by Google were weighted to obtain the following compo-  
site indicator:  
Even if a vaccine does become available in late 2020 or early 2021,  
the situation will continue to worsen in the weeks ahead. In a recent  
speech before the Bay Area Council Economic Institute, Federal Reserve  
Chairman Jerome Powell warned that the next few months would be  
IGM = 0,19.∆IRET + 0,18.∆IRES +0,18.∆ITRANS +0,18.∆IPHARM +0,17.∆IWORK + 0,10.∆IPARK  
very difficult”. The State of New York, which has waged one of the  
where: ∆ expresses monthly change (normalized) in indicators; IGM :  
the overall mobility indicator; IRET : retail and recreation customer traf-  
c indicator; IRES : total time spent at home indicator (opposite sign);  
ITRANS : public transport indicator; IPHARM : food and pharmacy traffic  
indicator; IWORK : commuting trafc indicator; IPARK : park traffic indicator.  
bitterest fights against the pandemic, has had to close its schools  
again, while most retail stores and public spaces have shut down again  
in California. Mobility reports by the internet search engines show  
that activity is slowing. After rebounding for several months, private  
consumption seems to have contracted in November, falling between  
1
% and 1.5% (see box and chart 3). Moreover, this decline is expected  
Estimates of private consumption trends were obtained using linear  
regression between the data series provided by the Bureau of Economic  
Analysis (BEA) and the IGM trend as calculated above. Although it is  
based on a limited number of observations and is thus fragile, the  
similarity is remarkable. For the month of November, it suggests that  
consumption will drop into negative territory after a 6-month rebound  
to worsen in December.  
Even before he was elected, Joe Biden worked with House Chair Nancy  
Pelosi to promote a supplemental budget package to fight the pandemic.  
The pre-electoral atmosphere combined with the summer’s economic  
rebound was not propitious for a bipartisan budget agreement, and  
the status quo prevailed. With the economic horizon darkening again,  
this stand-off seems increasingly unsustainable. Recently, a bipartisan  
initiative was launched in the Senate to unblock nearly USD 1,000 bn  
in emergency funds. In addition to purely health-related measures  
(
see chart 3).  
1
Insee, Point de conjoncture, 17 November 2020.  
(
widespread testing and tracing procedures; facilitating access to  
healthcare), the package proposes to raise and extend the Federal  
Unemployment Benefit Program (which was lowered to USD 400  
a week) and to beef up the Paycheck Protection Program, a support  
mechanism for small businesses.  
CONSUMPTION PLUNGES AGAIN  
Private consumption, m/m, vol. s.a  Estimation via Google Mobility  
0%  
1
Completed on 7 December 2020  
5
%
%
Jean-Luc Proutat  
0
-
5%  
-
-
10%  
15%  
Jan-20  
Mar-20 May-20  
Jul-20  
Sep-20  
Nov-20  
CHART 3  
SOURCE: BEA, GOOGLE, BNP PARIBAS  
1
At 5 December 2020, the Covid-19 incidence rate in the European Union was 23 new  
cases a day per 100,000 inhabitants (7-day moving average for Germany, France, Italy,  
Spain, Portugal, the Netherlands, Belgium, Austria, and Ireland) compared to 53 new cases  
per 100,000 in the United States. Source: Johns-Hopkins University.  
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