The Conference Board Economic Forecast for the US Economy - August 2020 | The Conference Board
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U.S.ECONOMIC OUTLOOK

The Conference Board Economic Forecast for the US Economy - August 2020

August 13, 2020

 

With second quarter 2020 GDP growth down to -32.9 percent (annualized rate compared to the first quarter of 2020) the US economy is struggling to recover from the single largest quarterly contraction in 75 years. This historic figure followed a contraction of 5 percent in the first quarter. Moving forward, we expect the economy to rebound in the third quarter, but there are numerous upside and downside risks at play.

Following the lockdown seen around the country in late March and April, the US economy began to reopen in May. Various economic indicators have rebounded in June and July at a greater than expected rate. However, a new surge of COVID-19 cases in various parts of the country is threatening to dampen the recovery path. While this resurgence in cases appears to be moderating in some parts of the economy, another threat looms: high unemployment levels and the resulting damage to consumer spending.

Looking ahead, The Conference Board currently has two recovery scenarios for the US economy:

Base Case Forecast: Our base case forecast includes a third quarter GDP rebound of 26 percent and a fourth quarter GDP contraction of 1.6 percent, both annualized rates. Given the severity of the economic contraction in the second quarter even a moderate improvement in economic activity over the summer yields strong growth rate in the third quarter. In our baseline forecast consumer spending is the largest driver of growth over the summer, but then stalls as high levels of unemployment damage spending later in the year. This yields an annual growth rate of -4.9 percent in 2020 and puts the US economy on a path for about 2 percent growth in 2021.

In terms of monthly economic output (see chart below) we estimate that the US economy shrank by nearly 15 percent in absolute terms between January and April 2020. The fast rebound in May and June, however, narrowed that monthly output decline to around seven percent. Our base case forecast yields disappointing progress in the months ahead, however, and we expect Dec 2020 monthly output to remain 6 percent below the level seen in January 2020. We do not expect a full recovery until early 2022.

Upside Forecast: Alternatively, we offer a second more optimistic scenario in which the growth trend seen in May and June is sustained in July, August, and September. Even if this is the case, we would still expect high unemployment rates, in the double digits, to damage consumer demand in the fourth quarter. This upside forecast results in an annual growth rate of -3.3 percent in 2020 and a rebound of 4.4 percent in 2021. In this scenario US monthly economic output with completely recover by August 2021.

 

The U.S. 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
first 
half
second
half
ANNUAL
ANNUAL
ANNUAL
Real
GDP
-5.0 -32.9 26.1 -1.6 2.0 6.7 2.2 -4.9 2.0
Real
Consumer
Spending
-6.9 -34.6 27.8 -0.5 2.7 6.8 2.4 -5.6 2.6
Residential
Investment
19.0 -38.7 8.0 1.0 4.0 5.5 -1.7 -2.2 0.7
Real
Capital
Spending
-6.7 -27.0 -8.9 0.6 3.4 5.6 2.9 -8.2 -0.7
Exports -9.5 -64.1 25.0 5.0 5.0 5.0 -0.1 -16.2 -0.1

*Actual data

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