The economic shape of things to come?

The US Congressional Budget Office (CBO) recently issued estimates for real GDP growth in 2020. Bad news: they estimate negative year-on-year growth of -3.5% for first quarter. Really bad news: that drop is overshadowed by a massive forecasted plummet of -39.6% in the current second quarter.

As if that's not bad enough, another government agency, the Bureau of Economic Analysis (the official source for GDP data) today issued its own preliminary figures showing a still greater first quarter decline of -4.8%. Although that does not automatically imply second quarter growth will be worse than the CBO's forecast, just using the CBO numbers as a baseline indicates a whopping $8.3 trillion drop in US economic output between April and June. The loss is roughly equivalent to twice the size of the entire German economy.

And yet, the relatively happy news amidst the see-sawing economic effects of Covid is that expectations are for high, double-digit rebound growth in the second half of 2020. Starting June, the US should be getting back "about a Germany's-worth" of GDP output: $4.6 trillion. Far from full recovery of lost economic value, but also filling in a large portion of the economic sinkhole being formed at present.

US real GDP growth patterns lend credence to arguments that actually, the optimism expressed in American equity markets is not divorced from reality. The growth bounce-back, should it come to pass, is consistent with the V-shaped recovery that Wall Street has been predicting. Add to that encouraging signs of scientific solutions to Covid emerging, and it is conceivable that economic recovery could be stronger than generally expected now.

#US_GDP #WallStreet #Coronavirus #Covid #Recovery #Economy #EconomicGrowth


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