JANUARY 4, 2021 – ECONOMISTS GUARDEDLY OPTIMISTIC FOR THE NEW YEAR
As the new year begins, the news is not great. Coronavirus cases are rising across the country, restrictions on businesses remain in place and economic growth has slowed in the last few weeks. But economists see several reasons why 2021 should start improving.
The new pandemic-relief package will bring $900 billion into the economy over the coming months. American consumers who increased their personal savings rate over the course of 2020 will be able to dip into those savings to lift spending as restrictions ease and more vaccinations are administered, allowing for freer movements. It is expected these two factors will start the economy moving in the second half of the year. Add in historically low borrowing costs, which are expected to remain near zero for three more years, making it easier for the economy to begin a rally.
Goldman Sachs has said they expect US GDP to grow by 5.8 percent in 2021 after a 3.5 percent contraction this year. Moody’s is more cautious, looking at 4.2 percent growth for 2021. The first quarter of the year should still be tough for many businesses, and the shape of the recovery will depend on when consumers finally feel comfortable enough to return to their pre-pandemic spending habits.