US Economic Outlook Gets Another Upgrade

The Conference Board forecasts that US real GDP growth will rise to 6.0 percent (year-over-year) in 2021, vs. our March forecast of 5.5 percent. This upgrade to our base case forecast scenario (black line) is due to stronger than expected economic indicators in Q1 2021, the rapid deployment of a $1.9 trillion fiscal support package, and a faster than projected vaccination campaign.

Nevertheless, the immediate future remains uncertain with both downside and upside risks at play. Our Downside Scenario (blue line) assumes that, among other things, a vaccine-resistant COVID-19 mutation emerges later this year, the vaccination campaign is prolonged, and the Federal Reserve signals that it will begin to tighten earlier than expected. Under this pessimistic scenario economic growth drops to just 4.7 percent this year. Alternatively, our Upside Scenario assumptions include universal access to vaccines by the end of Q2 2021, and the swift approval of the new Administration’s recently announced $2.3 trillion infrastructure and taxation plan. Under this more optimistic scenario economic growth could swell to 6.7 percent in 2021. At present, we believe there is more upside risk to our base case forecast than downside risk.

For additional details on The Conference Board’s US economic forecast and recovery scenarios please visit our website (link).