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FDI: US Economic Forecast, 1St Quarter 2021 - Richard Oyamo reports

After a gruesome year of lockdowns, re-openings, and further lockdowns, finally, there is light at the end of the tunnel. The last few months, which have seen the impact of the Coronavirus pandemic being the most severe, economic forecasters had predicted the worst – mainly from fears the pandemic could cause permanent damage to the economy.

These fears were valid though. Federal and local state governments – and pretty much the whole country – had to introduce more restrictions to curtail the spread of the virus, meaning fewer outdoor activities. Restaurants and other businesses were forced to minimize outdoor operations.

While all that was psychologically frustrating, the onset of winter months came with new variants of Covid-19 that, according to the CDC, were classed as being more contagious than the original stand of SARS-CoV-2. All these factors, coupled with the decreasing pool of consumer savings, threatened to weigh negatively on the economy.

Early January saw the mass rollout of vaccinations that averaged 400,000 doses daily. Mid-February saw an accelerated vaccine supply to a daily rate of 1.5 million does, with sights set on resumption of the economy – notwithstanding the peak infection rates in several states. But the baseline was, could we be possibly looking at a silver lining?

The light at the end of the tunnel is finally here. Based on April 29, 2021, economic news release report, the US economy grew by an annual figure of 6.4% in Q1 of 2021, which was an increase from the 4.3% expansion of Q4 of 2020. That is positive news for traders and marketers, seeing as how huge the economic contraction was for last year. This is welcome news, but the economic bottom line scenario, nonetheless, is that forecasters assume some form of permanent damage on the GDP based on where it would have been had the coronavirus pandemic never struck.

But How Did We Get Here in The First Place?

Reopening efforts, coupled with mass vaccinations, revaccinations, increased exports, and the government's strategic response to the pandemic, reversed the declining personal consumption expenditure (PCE) and the residential fixed investment. And while the market expectations had estimated a Q1 2021 growth at 6.1%, this has been surpassed. The post-pandemic economic boom anticipates a spike in consumer expenditure that is to peak in the summer and fall.

This is anticipated to increase the GDP through higher interest rates and pressures resulting from inflation. As such, the GDP will further be constrained to a period of slow economic growth, which is then expected to move the economy towards equilibrium (normal), hence attain a lower level that assumes a scenario had the pandemic not struck.

(Editor: Richard Oyamo)


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