(Bloomberg) -- The U.S. economy is still set for a third-quarter recovery, and the impact of the virus surge in Sun Belt states on crimping growth will be limited, top Trump administration officials said.
“I don’t deny that some of these hot-spot states are going to moderate that recovery, but on the whole the picture is very positive and I still think the V-shaped recovery is in place,” White House economic director Larry Kudlow said on CNN’s “State of the Union” on Sunday.
“And I still think it’s going to be 20% growth rate in the third and fourth quarters,” he added.
Kudlow, who also said he expects a federal moratorium on renter evictions to be extended, aligned with Treasury Secretary Steven Mnuchin, who told Fox News he expects a major rebound after an historic slump in the quarter that ended June 30.
“We always have the second quarter was going to be a very bad quarter. Again, that’s not for economic reasons. That’s for health reasons. We literally shut down the entire economy,” Mnuchin said. “The third quarter, the consensus is 17% GDP [growth], so we do think you’re going to see a very big rebound.”
The comments contrast with warning signs that the pandemic recovery could be faltering as Covid-19 cases surge and the U.S. death toll exceeded 1,000 on four days last week.
Meanwhile, lawmakers are debating of another round of stimulus spending with Republicans in disagreement with Democrats and among themselves over details of what it should cover.
Mnuchin said President Donald Trump’s administration and Senate Republicans are on the same page on the Republican-proposed $1 trillion package. One focus cited by Mnuchin and Kudlow is to limit wage replacement to 70%, which proponents view as an added incentive for people to return to work.
Though massive unemployment appeared to have leveled off, U.S. weekly jobless claims rose for the first time since March in the latest report, the clearest sign yet of a pause in the economic recovery. Consumer sentiment further soured in July. A 1.2% drop in the S&P 500 on Thursday was the index’s biggest decline in almost a month.
Residential real estate has been a bright spot, with home sales hitting an almost 13-year high amid record-low borrowing costs.
Kudlow said the virus surge in the populous states of Florida, Texas and California will lead to “a moderation of this recovery -- no question.” Yet other indicators, such as housing, retail sales and auto sales, paint a brighter picture, he said.
“First of all, I don’t think the economy is going south -- I think it’s going north,” said Kudlow. “There are some key states, yes, California and Texas and Florida that are having hot-spot difficulties right now, but it’s nothing like it was last winter.”
“The states are in charge of” containing the virus, he said. “Each state has a different story. Most of the states are doing rather well in this.”
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