Roundup: U.S. economic growth outlook dims on pandemic waves, weaker stimulus

0 Comment(s)Print E-mail Xinhua, November 21, 2020
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by Xinhua writer Liu Yanan

NEW YORK, Nov. 20 (Xinhua) -- The U.S. economy could see slower and even negative growth once again in the first quarter of 2021 due to soaring COVID-19 infections, newly imposed restrictions on mobility as well as smaller and slow stimulus measures, according to multiple investment research institutions.

The U.S. economy would shrink 1 percent in Q1 next year due to worsening pandemic across the country following an expected growth of 2.8 percent in the fourth quarter this year, said JP Morgan in a client note on Friday.

Earlier, the investment bank forecasted that the U.S. economy would have annualized growth of 2 percent to 3 percent from Q4, 2020 to Q1, 2021 with the stability of recovery relying on additional fiscal stimulus.

Daily COVID-19 infection tally in the United States refreshed record highs recently and a number of local governments have re-imposed curfews or school closures to check the outbreak of the pandemic.

The downside risk facing the U.S. economy also was echoed by other research institutions though JP Morgan became the first major one to predict a negative growth in Q1, 2021.

Without further extension, the expiration of federal unemployment insurance programs in the end of December could be a drag of up to 1.5 percent points to economic growth in Q1, 2021, said a research note by Bank of America Global Research on Friday.

The end of other pandemic-assistance programs would provide further headwinds early next year without additional stimulus, warned Bank of America Global Research.

The U.S. Department of Treasury on Thursday decided not to extend five Fed-operated facilities via tapping funds from the Coronavirus Aid, Relief, and Economic Security Act after the facilities expire on Dec. 31, which caused investors' concern on market stability and growth prospects.

The U.S. economy faces upside risk from rollout of COVID vaccines and downside risk from fiscal cliff, said Mark Haefele, chief investment officer of UBS Global Wealth Management, on Tuesday.

The United States could enact another coronavirus aid package of 500 billion to 1 trillion U.S. dollars, according to an outlook report recently issued by UBS.

Congress could pass another stimulus package of 500 billion to 1 trillion dollars in Q1, 2021, offsetting the drag from expiring programs and supporting growth in Q2, 2021, according to Bank of America Global Research.

JP Morgan holds a relatively optimistic view and expects the United States to roll out around 1 trillion dollars of additional fiscal stimulus likely starting from the end of Q1, 2021.

However, the size of additional fiscal stimulus seems to be much smaller than around 2 trillion dollars, which was once close to be announced prior to the U.S. general election in early November.

JP Morgan also expects the U.S. economy to expand 4.5 percent in Q2 and 6.5 percent in Q3, 2021, respectively.

U.S. real GDP increased at a seasonally adjusted annual rate of 33.1 percent in Q3 after recording 31.4 percent of sharp drop in Q2 amid pandemic lockdowns, according to data issued by the U.S. Bureau of Economic Analysis. Enditem

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