IHS Market: Projected 2020 GDP Growth Creeps Up to -3.5% as Inventory Investment Strengthen

IHS Markit reports that recent data imply third-quarter real GDP growth near 33%, stronger than anticipated previously.

According to Joel Prakken, chief US economist and co-head US economics, IHS Markit,  this has encouraged them to revise up their forecast for growth in 2020 from -4.0% to -3.5%.

“However, after the third quarter we expect GDP growth to fade, as catch-up spending wanes, federal and state & local fiscal support dissipates, and stubbornly high COVID-19 infection rates leave states cautious about re-opening their economies and encourage continued caution by consumers and business independent of official containment measures,” he says.

Still, they project GDP to surpass its previous peak in late 2021, and the economy to regain full employment in 2023.

Chris Varvares, co-head US economics, IHS Markit, maintains that their forecast assumes emergency unemployment benefits of $300/week and another round of stimulus checks are disbursed during the fourth quarter.

“The economy faces renewed risk early in 2021 when fiscal support wanes. However, we assume a vaccine becomes available in mid-2021, allowing the recovery to progress even without pandemic relief measures beyond those we assume,” he concludes.

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