ACEC Macro-Economic Update, Week Ending April 11, 2020

ACEC News / Industry Statistics

April 13, 2020

ACEC Macro-Economic Update, Week Ending April 11, 2020

By Erin McLaughlin

Federal Reserve Unveils Main Street Lending Program, Other Steps to Shore Up Economy

The Federal Reserve announced an expansion of nine different programs that will support $2.3 trillion in lending to U.S. businesses and states, including the new Main Street Lending Program (MSLP). The MSLP facilitates four-year loans to companies with 10,000 or less employees and revenues under $2.5 billion. Many of the requirements are similar to those in the CARES Act Paycheck Protection Program (PPP) direct loan, although its aim is help larger businesses. MSLP has a minimum loan size of $1 million and the first year principal and interest payments are deferred. Firms who take advantage of the PPP loan—which is limited to companies with less than 500 employees—may also take out Main Street loans, according the Fed. The Wall Street Journal reports that the Fed has not had a direct lending program such as this since the 1930s.

Federal Deficit Grew 8% in First Half of Fiscal Year

The federal budget deficit grew by eight percent in the first half of the 2020 fiscal year (October – March), reaching $743.6 billion, according to Department of Treasury numbers released Friday, April 10. The Wall Street Journal reports this is the largest budget gap for a sixth month period since 2012, when the United States was still recovering from the Great Recession. The deficit is expected to increase even more dramatically in the second half of FY2020, as federal revenue from taxes is reduced and economic rescue efforts ramp up as the economic impact of COVID-19 is realized. Goldman Sachs expects the deficit to reach $3.6 trillion for the full fiscal year. A key metric economists will watch for is the U.S. deficit as a percentage of gross domestic product (GDP). At the end of FY2019 the deficit was 4.6 percent of GDP; this ratio was highest in recent decades during FY2009, when the deficit was 9.8% of GDP, according to Brookings.  

Erin McLaughlin is ACEC Vice President Private Market Resources.

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