US Economy Outlook
So far in 2021, the stock market did out come out flat as predicted. However, as the chart below predicts, the US economy, buoyed by business reopening and vaccination shots, is set to rocket, perhaps by 10% in GDP growth.
The 6 month forecast is especially good. There is huge pent up demand, especially in the housing market which will play a big part in gross domestic product increases.
Jerome Powell on the Economy
The U.S. economy is “much improved,” Federal Reserve Chair Jerome Powell said.
“The recovery has progressed more quickly than generally expected and looks to be strengthening.” Household spending has risen, and the housing sector has more than fully recovered.
Trillions in Stimulus Should Last Several Years
The government’s plan is for more a $3 trillion in stimulus and infrastructure spending over several years.
Americans and everyone around the world will be released from fear during this year. The optimism and pent up demand will help create explosive, albeit bubble-like conditions.
The success of the S&P, Dow Jones, and NASDAQ, and in particularly, TESLA and Apple of recent, is just a taste of what’s to come. Keep an eye on the Russell 2000 index of small caps, as this sector looks like it has stocks with unusual growth potential.
The stock market predictions from the experts is positive. There is still some growth expected and the outlook for small business will improve by July. Looking for the best tech stocks or best post covid stock picks?
What are the Top Economic Indicators?
- GDP (was +4.3% in Q4 2020, while 1st quarter estimates are for 5.5%)
- unemployment (unchanged at 6.2% with high number of drop outs)
- industrial production (+.9%)
- consumer spending (-.4% in November)
- inflation (+.4% in December and is forecast to be 2.4% in 2021)
- housing market (sales up .7% and home prices up 12.9% YoY)
- new housing construction (permits down 10% and starts down 10% during February)
- construction spending (year over year, private construction up 6.8%, and public construction up 2.9%)
- manufacturing sales (up 4.7% from December 2020)
- retail spending (rose 3% from January)
CNBC interviews Joe Duran Goldman of Goldman Sachs about the outlook for economic recovery. He says the US will have the best GDP growth rate at the end of 2021.
The manufacturing jobs numbers were excellent which will of course make the 2021 stock forecast much brighter. As the Trading Economics researchers have it, we’re on the rise again.
US Manufacturing Output
Right now, the stock market is telling us our economic future is very bright. It’s waiting for the rest of us to catch up. and 2021 will see consumers and workers finally catch back up. This sudden recession was bad, and it will stick around for a couple of months, but the changes coming out of it, are very positive and will drive US growth.
In reality, with businesses reopening and $2 Trillion of stimulus funding, the US will accelerate well out of this vicious recession.
GDP Forecasts to 2024
GDP did take a big wild hit, but the coming summer months will see latent demand supporting businesses restarting. Those in the restaurant, hotel, air travel, and professional services will see a slow return to normalcy by the fall. The China trade friction, repatriation of business back to the US, a declining trade imbalance, higher tariffs on China exports, and a return to the optimism Americans were feeling the last 4 years will take hold.
Previous forecasts may actually still be accurate as the China virus period passes into history.
Real GDP Growth Forecast
Stock Market and Consumer Sentiment Rising
Consumers are spending again and consumer confidence index is rising fast. People are coming out of their funk and negativity. The Dow Jones, S&P, NASDAQ, and Russel Index are rising fast, although a bumpy ascent.
If we look more at macroeconomic influences, we know that stimulus, lower interest rates, and pro US legislation has to spell good news for the economic forecast.
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This post discusses the main economic factors to watch – namely China’s manufacturing production (to fill current demand), international trade declines, rising USD value, consumer spending trends, employment, and growth in US productivity.
5 Year Forecast: Will the Momentum End?
US banks are strong, and consumer sentiment is rising. And interest rates could go lower, giving home buyers a big break and helping businesses handle financial challenges better. And as imports of foreign goods wane, consumers will be buying more US produced goods. Even products that were sitting, unsellable on the shelves might finally be sold. This correction could be a good thing for the US.
Democrat experts aren’t paying attention to any positive effects of the global economic pullback. They’re hoping to discredit the Trump republicans any which way. Yet, the US will likely get through the Corona pandemic should it take several more months. So far, cases in the US of the virus have been very limited. This could all blow over.
Latest US Economic Stats
Let’s take a look at some key economic stats and charts that include employment, income, savings, GDP, consumer spending, business spending, manufacturing & services, housing, mortgages, and the balance of trade. The crux of the economy is consumer spending bolstered by strong employment and rising investment in US business. GDP is down but with the level of wealth in the US, it would take something monumental to bring this economy to its knees.
Real GDP has been flat for the last 3 quarters primarily due to political blockades, and the lengthy transition of production from China back to the US. The US dollar which of course, is in very high demand is making it tougher for US companies to get re-established and competitive. Quantitative easing might take care of the issue of the US dollar being everyone’s flight to safety.
US corporations are sitting on mountains of cash, and aren’t investing, spending or sharing.
us disposable income and spending
Consumer disposable income is climbing fast which could bolster the housing market forecast for 2020.
The struggle for US manufacturers to ramp up in the face of tough international competition and the China supply chain. This chart shows more needs to be done to strengthen US capabilities in the pivotal manufacturing sector. As manufacturing goes, so does design, marketing, services, and investor dollars. This is the key battle ground for future economic success.
Continue to Part 2 of the Economic Forecast
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* the above post includes opinions of the author and do not connote recommendations of any kind regarding stocks to invest in. The material is provided as general information only. For all your stock investment decisions please refer to your financial investment advisor.
Housing Market Forecast – copyright Gord Collins
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