US: Growth temporarily dragged down by coronavirus resurgence – Capital Economics

Commenting on the US Bureau of Economic Analysis’ advanced estimate for fourth-quarter GDP report, the modest 4.0% growth was mainly due to some temporary weakness in consumption amid the resurgence in coronavirus infections, note Capital Economics analysts.

Key quotes

“With coronavirus cases now falling and Congress agreeing on a new $900bn stimulus late last year, we expect consumption growth to accelerate again in the first half of this year. First-quarter GDP growth should be 5% and second-quarter growth could be nearer 10%, particularly if Congress agrees on more stimulus.”

“GDP was still down by 2.5% on a year earlier, but that represents a much faster recovery than we would initially have expected given how grim things looked in mid-2020. With effective vaccines offering the possibility of a return to normalcy later this year and the Biden administration intent on more fiscal stimulus, we think GDP growth will be as high as 6.5% this year.”