The U.S. economy is set to grow at its highest annual rate in decades this year, outperforming most of its major counterparts, with the outlook vastly improving, but another COVID-19 surge was the biggest risk in the next three months, according to the report. a Reuters survey showed.
There was a new wave of optimism among economic forecasters who predicted a boost to economic activity from the already passed $ 1.9 trillion pandemic relief package and also from US President Joe Biden’s proposed $ 2 trillion infrastructure plan, according to the April 16-20 poll of more than 100 economists.
The world’s largest economy was expected to grow by an average of 6.2% this year, marking the brightest outlook since the polls began for the period over two years ago and, if achieved, would mark the fastest annual expansion since 1984.
While the International Monetary Fund’s latest projection of 6.4% expansion was slightly more optimistic than the poll’s consensus, about 15% of 105 economists predicted that the economy would grow by 7% or more this year, with the series of forecasts showed higher peaks and troughs. 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 resurgence in coronavirus cases in the next three months.
“We have increased our growth forecast thanks to additional tax incentives and the rapid vaccination program,” said Sal Guatieri, senior economist at BMO Capital Markets. “
“As a result, the US economy is smoking. But a new wave of cases would jeopardize our forecast. For now, we don’t believe this will lead to another round of aggressive restraints.”
Reuters poll on US economic outlook: https://fingfx.thomsonreuters.com/gfx/polling/qmypmlxxdvr/EQ%20U.S.%20April.PNG
After likely growing 5.8% year-on-year in the previous quarter, the US economy was expected to grow 8.5% this quarter. That marks a sharp improvement – in stark contrast to forecasts for most major developed economies – of 7.2% forecast for this quarter last month.
While the US economy was expected to return to pre-crisis levels this year, the unemployment rate was expected to last more than a year, a majority of economists said in response to a separate question.
“As we will get later in the year and certainly in 2022, the stimulus from not only reopening but also from fiscal stimulus will wane to the point where the stimulus turns into a fiscal drag,” said Jim O’Sullivan, chief macro strategist of the United States. USA. at TD Securities.
“So there are many reasons not to simply extrapolate the strong data we are seeing now and we expect the net result to ultimately be less than a full recovery in the labor market.”
While the Federal Reserve’s preferred inflation indicator – the core price index for personal consumption expenditure (PCE) – would average 2.0% this year and next, more than 90% of the nearly 50 economists said risks were upward distorted.
Reuters graphical poll on US economic growth, inflation and unemployment outlook: https://fingfx.thomsonreuters.com/gfx/polling/yxmpjdeeapr/US%20April%20dschart.PNG
Fed Chairman Jerome Powell acknowledged “slightly higher” temporary inflation this year on Tuesday, but said the central bank is committed to limiting any overshoots.
Asked when the Fed was likely to start winding down its monthly asset purchase program, more than half, or 28 of the 52 economists, said in the first quarter of next year. Twelve said sometime this year and 12 said later.
“Fed officials link policy decisions to employment and inflation, which is normal, but confidence in achieving key goals relies heavily on reopening and a return to normal for the economy,” said Stephen Gallagher, chief US economist at Societe Generale .
“They are more likely to talk about tapering by mid-year, and the message should get stronger. This guidance strategy should make it possible to phase out asset purchases in early 2022. “
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