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US ECONOMIC OUTLOOK

The Conference Board Economic Forecast for the US Economy

March 10, 2021

The Conference Board forecasts that US Real GDP growth will rise to 3.0 percent (annualized rate) in Q1 21 and 5.5 percent (year-over-year) in 2021.* Following a lull in the economic recovery in November and December, growth has improved. We expect real GDP growth to accelerate further over the coming quarters as new COVID-19 infection rates steadily decline, the vaccination program expands, and an additional large fiscal support program is deployed. Following a robust recovery in 2021, we forecast economic growth of 3.5 percent (year-over-year) in 2022.

While the economy has already partially rebounded from the deep contraction in the first half of 2020, a variety of factors will determine the way forward. Key variables include: a) the spread of the virus itself, b) the deployment and effectiveness of COVID-19 vaccines, c) the size and timing of fiscal support, and d) the status of labor markets and household consumption; and (e) the pace at which mobility and travel restrictions are lifted. While there are many possible outcomes for these factors, The Conference Board has generated three potential recovery scenarios based on specific sets of assumptions.

Base Case Forecast

As noted above, our base case forecast yields Q1 21 real GDP growth of 3.0 percent (annualized rate), and an annual expansion of 5.5 percent (year-over-year) in 2021.* The recovery will likely continue into next year and yield an annual growth rate of 3.5 percent (year-over-year) in 2022. We view this scenario as the most probable. It assumes: a) new cases of COVID-19 peak in early Q1 21 and many social distancing restrictions are subsequently retracted; b) COVID-19 vaccinations rise in Q1 21, are broadly available in Q2 21, and are universally available in early Q3 21; c) $1.9 trillion in additional fiscal support is deployed in Q2 21 and Q3 21, and d) moderate improvements in labor markets and consumption in Q1 21 precede a sharp rebound in Q2 21 and Q3 21. In this scenario, US monthly economic output returns to pre-pandemic levels in May 2021.

Upside Forecast

Alternatively, we offer a second more optimistic scenario in which the economy grows 6.5 percent (year-over-year) in 2021. This scenario assumes: a) new COVID-19 cases fall dramatically in Q1 21 and all social distancing policies are virtually eliminated in Q2 21; b) vaccines are broadly available by the end of Q1 21 and are universally available in Q2 21; c) $1.9 trillion in additional fiscal support is deployed in Q2 21 and Q3 21 with more on the horizon; and d) large improvements in unemployment result in a rebound in consumption by the end of Q1 21. In this scenario, US monthly economic output returns to pre-pandemic levels in April 2021.

Downside Forecast

Finally, we offer a third more pessimistic scenario in which the US economy grows by just 2.8 percent (year-over-year) in 2021. This scenario assumes a) new cases of COVID-19 rise as vaccine-resistant mutations result in an additional wave by Q4 21; b) social distancing restrictions remain and are augmented to address the outbreaks; c) distribution of vaccines is prolonged and mutations render them ineffective; d) the fiscal support package is reduced in size and delayed until sometime in Q2 21; e) unemployment deteriorates and the consumption recovery stagnates; and f) a large correction in equity markets hurts consumer and business confidence. In this scenario, US monthly economic output does not recover to pre-pandemic levels until sometime in 2022.

* The Conference Board is upgrading its forecast of 2021 real GDP growth from 4.4 percent (annualized rate) to 5.5 percent (annualized rate). This upgrade is due to stronger than expected economic indicators in Q1 21, the imminent passage of a larger than anticipated fiscal support plan, and a faster than projected vaccination campaign.

 

The US Economic Forecast

 

THE CONFERENCE BOARD BASE CASE ECONOMIC OUTLOOK, 2019-2020-2021
Percentage Change, Seasonally Adjusted Annual Rates


 20202021201920202021
 
I
Q*
II
Q*
III
Q*
 IV
Q*
I
Q
II
Q
III
Q
 IV
Q
ANNUAL
ANNUAL
ANNUAL
Real GDP -5.0 -31.4 33.4 4.1 3.0 8.5 6.9 4.8 2.2 -3.5 5.5
Real Consumer Spending -6.9 -33.2 41.0 2.4 3.9 9.9 7.9 5.1 2.4 -3.9 6.3
Residential Investment 19.0 -35.5 63.0 35.8 20.0 16.0 10.0 7.0 -1.7 6.0 19.5
Real Capital Spending -6.7 -27.2 22.9 14.0 7.5 8.5 7.3 6.3 2.9 -4.0 7.9
Exports -9.5 -64.4 59.6 21.8 10.2 8.6 7.1 6.6 -0.1 -13.0 8.2

*Actual data


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