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Economists at Standard Chartered raise their 2021 US GDP forecast to 5.5% (previously 2.1%) and 2022 to 4.0% (3.8%) as the economy has proven more resilient to COVID-19 restrictions in 2021 than in 2020. Fiscal stimulus and a vaccine dividend will likely turbo-charge growth.

Key quotes

“Surveys suggest the economy has been much more resilient to pandemic restrictions than in Q2-2020, in part thanks to the late December COVID-19 relief package. Meanwhile the US vaccination programme could cover 60-70% of the population by the end of Q2. This would allow pandemic restrictions to be eased, opening up sectors of the economy that have been most affected by social distancing measures.” 

“Our expectation that growth will accelerate from late spring is further supported by the prospect of another fiscal package – we expect it to total $1.2 trn.”

“We now forecast Q4-2021 GDP growth of 6.5% YoY (previously 3.5%), taking GDP back to its trend level, and now expect Q4-2022 GDP growth to be 2% YoY. This could allow some 8 M jobs to be created and a return to the pre-pandemic level of employment by late 2022, although still short of full employment.”

“A deterioration in the pandemic would present downside risks to our forecast; proliferation of COVID-19 variants less susceptible to current vaccines would risk new restrictions being imposed on the economy. A key near-term risk is that domestic and international supply constraints may weigh on activity while driving cost pressures higher.” 

“On the upside, the fiscal stimulus may be larger than expected, though cost pressures would then risk becoming embedded in higher inflation.”