US Economic Outlook – Q2 contraction steepest since Great Depression

The US economy contracted 32.9% in an annualized qoq basis during the second quarter – the steepest drop on record since the Great Depression. We maintain our baseline real GDP growth outlook of a 6.4% contraction in 2020, and a partial rebound of 4.2% next year. Our GDP recovery trajectory implies that pre-pandemic levels of economic activity wouldn't return until 2023, meaning that the US economy would have effectively lost at least three years' worth of economic growth.

Key takeaways

  • We maintain our forecast of a 6.4% real GDP contraction in 2020, with a partial recovery of 4.2% next year.
  • Unemployment continues to trend down, however the economy is far from recuperating the 22 million jobs lost between April and May.
  • Medical care prices continue to climb during the pandemic, while the energy-related ones are trending down.
  • An impasse in Congress has allowed for key unemployment benefits to expire but we expect a compromise.
  • Home and vehicle sales are showing signs of strength, and key measures of manufacturing sentiment are back to 2019 levels.


Economic Outlook US Economic Outlook - 7 August 2020