The U.S. economy will grow at its fastest annual rate in decades this year and outperform most of its major peers, with sharply improved prospects, but another rise in COVID-19 posed the biggest risk during the next three months, according to a Reuters poll.
There was a new wave of optimism among economic forecasts that predicted an increase in economic activity from the $ 1.9 trillion pandemic relief package already approved and also from the infrastructure plan proposed by more than two trillion dollars from US President Joe Biden, according to the April 16-20 survey 100 economists.
The world’s largest economy is expected to grow by an average of 6.2% this year, the brightest outlook since surveys began during the period more than two years ago and, if achieved, would mean fastest annual expansion since 1984.
Although the latest projection of 6.4% of the International Monetary Fund was slightly more optimistic than the consensus of the survey, about 15% of the 105 economists predicted that the economy would grow by 7% or more this year. year, with a range of forecasts showing higher highs and lows compared to last month.
But nearly 70 percent of economists, or 39 out of 56, in response to an additional question said the biggest risk to the economy was the resurgence of coronavirus cases over the next three months.
“We have increased our growth forecast due to additional fiscal stimulus and the rapid vaccination program,” said Sal Guatieri, senior economist at BMO Capital Markets.
“The result is that the US economy is smoking. But another wave of cases would jeopardize our forecast. For now, we assume it will not lead to another round of aggressive restrictions.”
Graph of the Reuters poll on the US economic outlook: https://fingfx.thomsonreuters.com/gfx/polling/qmypmlxxdvr/EQ%20U.S.%20April.PNG
After expanding at an annualized rate of 5.8% in the previous quarter, the U.S. economy was expected to grow by 8.5% this quarter. This marks a strong update, in contrast to forecasts for most major developed economies, from 7.2% forecast for this quarter last month.
While the U.S. economy was expected to return to pre-crisis levels this year, the unemployment rate was expected to take more than a year, according to a majority of economists in response to a different question. .
“As we will achieve later in the year and certainly in 2022, the momentum that entails not only reopening, but also the fiscal stimulus will disappear to the point where the stimulus becomes a fiscal drag.” said Jim O’Sullivan, American macro-strategist. and TD Securities.
“So there are many reasons not to simply extrapolate the strong figures we are seeing now and expect the net result in the end to be less than a full recovery of the labor market.”
Although the Federal Reserve’s preferred inflation indicator – the Basic Consumer Spending Price Index (CPP) – was expected to average 2.0% this year and next, more than 90% of about 50 economists said the risks were distanced.
Reuters graphical survey on the outlook for economic growth, inflation and unemployment rate in the United States: https://fingfx.thomsonreuters.com/gfx/polling/yxmpjdeeapr/US%20April%20dschart.PNG
Fed Chairman Jerome Powell on Tuesday acknowledged temporary inflation “slightly higher” this year, but said the central bank has pledged to limit any overruns.
Asked when the Fed is likely to start cutting its monthly asset purchase program, more than half, or 28 of 52 economists, said in the first quarter of next year. Twelve said it sometime this year and 12 said it later.
“Fed officials associate political decisions with the results of employment and inflation, which is normal, but confidence in achieving key goals depends largely on the reopening and return to normalcy of the economy.” said Stephen Gallagher, chief U.S. economist at Société Générale.
“After mid-year, they are more likely to talk about volume reduction and the message should be strengthened. This targeting strategy should reduce asset purchases in early 2022.”
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