Vaccines and government stimulus spur growth: U.S. Outlook to 2025

The Conference Board of Canada, 18 pages, April 19, 2021
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This quarterly report focuses on the latest economic developments in the U.S. economy, tracking trends in labour, consumer, energy and housing markets, and examining industries and regions. Monetary and fiscal policy assumptions are also included.

Document Highlights

  • The U.S. economy will expand by 5.7 per cent this year and 4.8 per cent in 2022.
  • The rebound in economic activity is being driven by the faster-than-anticipated rollout of vaccines, a massive fiscal stimulus, and an ultra-accommodative monetary policy.
  • The sharp rebound in growth will close the output gap in the second half of this year—far faster than we were anticipating last year at this time.
  • Growth will be led by the consumer as households spend some of the close to $2 trillion in increased savings they amassed last year due to restrictions on retail outlet openings and travel.
  • The savings rate won’t fall back to pre-pandemic levels over the medium term, as households will keep some funds aside for the inevitable increase in taxes needed to pay down huge deficits.
  • Employment won’t return to where it was in the early part of 2020. Many jobs that were lost in the service sector have been lost for good.
  • The fiscal deficit rose above $3 trillion in 2020 and will continue at these levels, led in part by President Biden’s $1.9-trillion stimulus package.
  • While these deficits are huge, they should be manageable, as we don’t expect short-term interest rates to start to rise again until early 2023.

Table of Contents

Key findings

Overview

Consumer holds the key

What will consumers do with all their savings?

Mixed outlook for investment spending

Would higher taxes crush investment spending?

Housing powers ahead despite recession

Upward pressure on home prices to ease

Pandemic crushes both exports and imports

Greenback set to drop in value

Interest rates at rock-bottom levels until 2023

Deficits as far as the eye can see

Would higher taxes sink the economy?

Labour markets improving but far from normal

Pandemic especially hard on women

Appendix A—Methodology and assumptions

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