IHS Markit sees United States (US) economic growth in 2020 could contraction around 4.8 to 6.1 percent, it said in the latest report - - Photo by White House

JAKARTA (TheInsiderStories) – IHS Markit sees United States (US) economic growth in 2020 could contraction around 4.8 to 6.1 percent, it said in the latest report. Recent data suggest stronger growth in the second and third quarters than anticipated previously.

However, rising COVID-19 infections and deaths convinced several states to pause, or backtrack on, plans to re-open their economies. The agency also expect rising infections to encourage new caution by consumers and business independent of official measures to contain the virus, even as federal fiscal support wanes and state and local governments tighten budgets.

“Consequently, we revised down our forecast for growth in 2021 from 3.7 percent to 3.1 percent,” said Joel Prakken, chief US economist from IHS Markit in a written statement on Tuesday (08/11).

He assumes, the emergency unemployment benefits are extended through December and another round of checks is sent to households this fall. The recovery will be at renewed risk early in 2021 when this income support expires. He believed a vaccine becomes widely available in the middle of next year, allowing a more fundamental recovery to finally then take hold.

For the third quarter, IHS Markit forecast an annualized increase of 20.0 percent compared to last year. Robust growth in the third quarter mainly reflects the estimated recovery through June, which elevates the level of third-quarter GDP relative to that of the second quarter.

“Several high-frequency indicators, though, support our estimate of a material slowing in the pace of recovery beginning in July, as households and businesses curtail activity in response to a resurgence of new COVID-19 infections,” said Ben Herzon, senior economist at IHS Markit on July 30.

US economy contraction 32.9 percent to 9.5 percent in the second quarter of 2020 compared to previous quarter, the lowest level in the country’ history. While, the Federal Reserve (Fed) rated the world largest economy would shrink to 6.5 percent this year.

However, the central bank expects the economy will return to growth in 2021, with unemployment falling to 9.3 percent and GDP increasing 5 percent, followed by 3.5 percent growth in 2022 amid the COVID-19 pandemic. Based on the latest estimation, chairman of the Fed, Jerome Powell, assured that the Bank is committed to using its full range of tools to support the US economy in this challenging time, thereby promoting its maximum employment and price stability goals.

The virus outbreak, he noted, is causing tremendous human and economic hardship across the US and around the world. The virus and the measures taken to protect public health have induced sharp declines in economic activity and a surge in job losses, said the governor.

In addition, said Powell, weaker demand and significantly lower oil prices are holding down consumer price inflation. But, financial conditions have improved, in part reflecting policy measures to support the economy and the flow of credit to US households and businesses.

Then, the ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term. He said, the policymakers will continue to monitor the implications of incoming information for the economic outlook, including information related to public health, as well as global developments and muted inflation pressures, and will use its tools and act as appropriate to support the economy.

The secretary of commerce reported, in the first quarter of 2020, US economy shrank 4.8 percent, the first contraction since 2014. The contraction was because efforts by the government to stem the spread of the COVID-19 have forced many companies in the country to close and consumers not to leave their homes.

“Today’ GDP numbers are weak, but in line with expectations as a result of the COVID-19-driven disruptions to daily lives at home and around the globe that have rocked global markets and supply chains,” said the secretary of commerce, Wilbur Ross in official statement released on on April 29.

He continued, “We continue to have the most resilient economy in the world, driven by innovative and hardworking Americans who have shown that they are willing to make the needed sacrifices to defeat this invisible enemy.”

Written by Staff Editor, Email: theinsiderstories@gmail.com