US Economic Outlook – virus resurgence elevating downside risks

Our baseline real GDP outlook foresees a 6.4% contraction in 2020, and only a partial rebound of 4.2% next year; though uncertainty around economic projections remains high and downside risks elevated. Retail sales and consumption data from May, and employment statistics from June are among the pieces of information that continue to show a relatively rapid recovery from the deep April trough. Meanwhile, a lot of those traditional indicators pre-date the recent renewed uptick in infections that have come to surpass the April records in absolute numbers. Hospitalization data has also inflected upwards, leading a number of states and municipalities to halt or even reverse reopening measures. Meanwhile, the improvement in mobility data has flattened or retreated in a number of states in the past week or so, adding downside risks to the nascent recovery. For now, the strength of the May-June rebound and relative resilience of aggregate mobility measures is enough to keep our growth projections unchanged, but we keep a watchful eye on the infections, government stringency and high-frequency mobility measures ahead.

Key takeaways

  • We forecast a 6.4% real GDP contraction in 2020, and only a partial recovery next year.
  • Uncertainty around all economic projections remains extremely high, and downside risks elevated.
  • The June jobs recovery continued to exceed expectations, but the surveys were conducted before the recent resurgence in infections.
  • Hotspot of new infections is moving south and west.
  • Around 20 states are currently at or near the peak for the number of new infections; nine states responsible for just over 20% of US GDP are seeing in excess of 200 daily new infections per million of population (as of 1 Jul 2020).
  • In another downside risk, fiscal support is waning under current law; in particular, the expiration of beefed-up unemployment benefits on 31 July is a key risk for consumer spending in 3Q20.
  • Housing and autos are likely to be relatively resilient this year.
  • Social distancing measures will continue to weigh on parts of the economy (particularly services) until an effective vaccine is widely available.


Economic Outlook Virus resurgence elevating downside risks