- The thin majority in the Senate will allow the incoming administration to deliver quickly a sizeable fiscal stimulus. We expect a package worth around US$ 800bn (on top of the US$ 900bn already agreed on in December), centred on the strengthening of direct income support to households, extended unemployment benefit and aid to local governments. The lack of a strong majority will likely delay measures on infrastructure and health insurance into 2022.
- Rising disposable income and the lifting of restrictions will lead consumption (especially in services) to soar from Q2 on, with a beneficial spill-over to capex. Therefore, we revise up our 2021 growth forecast to 5.5%. GDP will be back to the Q4 2019 level by the summer.
- Stronger growth will speed up the healing of the labour market, and we see the unemployment rate down closer to around 5% by year-end. Despite temporary spikes and base effects, we expect only a mild increase in inflation. This will allow Fed accommodation to continue but talks of a QE tapering are likely to start during the summer.