The second wave of coronavirus infections hurt consumption more than we were anticipating in July. But early signs are that spending picked up in August and has surprised to the upside this month, so the picture for Q3 as a whole hasn’t changed much. Meanwhile, the sharp rise in corporate debt last quarter was almost matched by a surge in the money holdings of non-financial firms. As such, most corporate balance sheets remain in decent shape. But with a boom in capex spending and sizeable wage hikes off the table, that extra cash is unlikely to stoke higher inflation further down the line.
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