GDP to Hit Pre-pandemic Peak By Mid-Year, Say Economists

“The acceleration in the COVID-19 vaccine rollout, strong data on consumer spending and the relaxation of COVID-19 containment measures by many states led to an upward revision of our forecast of GDP growth for 2021 from 5.7% to 6.2%, and for 2022 from 4.1% to 4.3%.

“We expect this growth to push GDP past its previous peak by the middle of this year and eliminate the output gap in 2022. The previous peak of employment will be regained in late 2022, and the unemployment rate is expected to decline to 3.5% by mid-2023,” says Joel Prakken, chief US economist and co-head US economics, IHS Markit

“This forecast does not include the President’s American Jobs Plan, which includes spending of $2.1 trillion on social investments over 8 years, paid for by higher corporate taxes over 15 years,” notes Chris Varvares, co-head US economics, IHS Markit

“Our initial estimate is that the plan could raise GDP growth by 0.3–0.4 percentage point through 2024 and push the unemployment rate below 3.0%, but lead to somewhat higher inflation and interest rates,” he concludes.

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