January 8, 2021

US: Fiscal stimulus to boost GDP growth to 5.5% in 2021

Share on facebook
Share on twitter
Share on linkedin
Share on email

In Short

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.
US: Fiscal stimulus to boost GDP growth to 5.5% in 2021
Share on facebook
Share on twitter
Share on linkedin
Share on email

Highlights:

  • 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.

Download the full publication below

US: Fiscal stimulus to boost GDP growth to 5.5% in 2021
January 8th, 2021
PDF

Also interesting

EU flag green
July 26, 2021
Focal Point

ECB greening of the credit market to start in 2022

triple peak
July 23, 2021
Market Perspectives

Market Perspectives ǀ Overfretting about the triple peak

European-Central-Bank-in-Frankfurt_web
July 22, 2021
Market Commentary

ECB sends a dovish message as new strategy increases threshold for raising rates