The U.S. economy will grow at its fastest annual pace in decades this year and outperform most of its key peers, with the outlook sharply upgraded, but a further COVID-19 boom was the biggest risk over the next three months , showed a poll by Reuters.
There was a new wave of optimism among economic forecasters that predicted a boost to economic activity from the already passing $ 1.9 trillion package, and also from US President Joe Biden’s proposed $ 2 trillion plus infrastructure plan. according to the poll of 16 to 20 April 100 economists.
It is predicted that the world’s largest economy will grow by an average of 6.2% this year, which is the brightest outlook since the poll began more than two years ago for the period and that it would be the fastest annual expansion since 1984 if it were reached. word.
While the International Monetary Fund’s latest forecast of 6.4% expansion was slightly more optimistic than the consensus poll, about 15% of the 105 economists predicted that the economy would grow by 7% or more this year, with the forecasts showing higher and higher lows in comparison. with last month.
But nearly 70% of economists, or 39 out of 56, said in response to an additional question that the biggest risk to the economy was a revival in cases of coronavirus over the next three months.
“We have increased our growth forecast due to additional fiscal stimulus and the rapid vaccination program,” said Sal Guatieri, senior economist at BMO Capital Markets.
“The result is that the US economy is smoking. But another spate of cases will jeopardize our forecast. For now, we assume it will not lead to another round of aggressive restrictions.”
Reuters poll on US economic outlook: https://fingfx.thomsonreuters.com/gfx/polling/qmypmlxxdvr/EQ%20U.S.%20April.PNG
After the US economy probably grew at an annualized rate of 5.8% in the previous quarter, the US economy would grow by 8.5% this quarter. This is a sharp upgrade – in stark contrast to forecasts for most major developed economies – of 7.2% forecast in this quarter last month.
While the U.S. economy would return to pre-crisis levels this year, the unemployment rate would last more than a year, according to a majority of economists in response to a separate question.
“As we will come later in the year and definitely in 2022, the boost of not only the reopening but also fiscal stimulus will fade to the point when the stimulus becomes a fiscal drag,” said Jim O’Sullivan, US macro strategist, said. by TD Securities.
“So there are many reasons not to just extrapolate the strong numbers we are seeing now and we expect the net result in the end to be less than a complete recovery in the labor market.”
While the Federal Reserve’s proposed inflation gauge – the core price index for personal consumption expenditure (PCE) – would average 2.0% this year and next, more than 90% of nearly 50 economists said the risks had been turned upside down.
Reuters poll on US economic growth, inflation and unemployment rate outlook: https://fingfx.thomsonreuters.com/gfx/polling/yxmpjdeeapr/US%20April%20dschart.PNG
Fed Chairman Jerome Powell on Tuesday acknowledged ‘slightly higher’ temporary inflation, but said the central bank was committed to curbing any excess.
On the question of when the Fed is likely to start reducing its monthly asset purchase program, more than half, or 28 of 52 economists, said in the first quarter next year. Twelve said somewhere this year and 12 said later.
“Fed officials link policy decisions to the results of employment and inflation, which are normal, but confidence in achieving key targets is highly dependent on reopening and a return to normalcy for the economy,” said Stephen Gallagher, chief economist. of Societe Generale, said.
‘After the middle of the year, they are more likely to increase on taper, and the message needs to be reinforced. This management strategy should enable the decline in asset purchases in early 2022. ”
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