US: GDP is forecast to expand 4.5% in 2021 – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest US GDP data published last week.

Key Quotes

“The 4Q 2020 GDP increased by 4.0% q/q SAAR (slightly missing Bloomberg Est 4.2%, but much better than UOB Est 0.0%), markedly slower from the record 33.4% surge in 3Q 2020. But if we exclude the record 3Q jump, the 4% growth in 4Q will be the highest growth since 3Q 2014. For 2020 as a whole, the economy contracted by 3.5%, slightly better than market (and our) expectations but it was still the worst contraction since 1946.”

“The growth in 3Q was again attributed to private consumption, business & residential investments and inventories, but their contributions notably were at a much slower rate compared to 3Q. Two components that previously dragged on US headline GDP in 3Q, continued to decline in 4Q, namely government fiscal stimulus and net exports of goods and services.”

“The recovery trajectory remains highly uncertain but premised on the successful rollout of vaccinations across the US, and more fiscal stimulus in the coming months, we now project, after a temporary 1Q contraction of 2%, US GDP will rebound meaningfully in the subsequent three quarters. The US full-year 2021 GDP is now expected to expand by 4.5% (from the previous projection of 2.8% made in Dec 2020). This is slightly less optimistic compared to the IMF’s latest revised 5.1% US GDP growth (made in its Jan 2021 WEO update).”