U.S. Outlook to 2025—August 2021

The Conference Board of Canada, 22 pages, August 5, 2021
Impact paper
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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 close to 7.0 per cent this year and 4.4 per cent in 2022. The increase in activity in 2021 is an upgrade from our spring outlook.
  • The rebound in economic activity is linked to surging consumer spending and solid gains in investment spending.
  • The sharp recovery in growth will close the output gap—the difference between actual and potential output—in the second half of this year.
  • Rising investment in equipment and intellectual property could set the stage for a recovery in productivity growth, which has been dormant since the end of the 2008–09 recession.
  • The savings rate won’t return to pre-pandemic levels until the end of the medium term, as some baby boomers will use the extra funds provided by the federal government to replenish their savings damaged during the 2008–09 recession and financial crisis.
  • Employment won’t return to levels attained in the early part of 2020, as some positions in the services sector will be lost for good.
  • The fiscal deficit hit over $3 trillion in 2020 and will continue at this level, due in part to President Biden’s $1.9-trillion stimulus package.
  • Such large deficits should be manageable, as we do not expect short-term interest rates to increase until the early part of 2023.

Table of Contents

Key findings
Aggregate demand
Red-hot housing markets
Deteriorating trade balance linked to rising purchases of imports
Rising inflation will not deter the Fed from running accommodative monetary policy
President Biden’s fiscal initiatives could boost economy’s prospects
Low-skilled workers in driver’s seat
Why are used-car prices surging?
Appendix A: Methodology and assumptions

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