The good news is that recent estimates have the U.S. economy poised for a record rebound following last quarter’s depressing GDP figures.
The bad news is that 2020 is still on track to be a miserable year for the economy when it’s all said and done.
New projections are forecasting U.S. GDP to grow by around 20% on an annualized basis in the third quarter, as activity ramps back up following coronavirus-related lockdown measures that devastated the economy through the first two quarters of the year.
Morgan Stanley is currently predicting a 21.3% spike in GDP this quarter, while financial data provider IHS Markit is estimating a 20.1% increase in the third quarter. Economists at S&P Global Ratings, meanwhile, forecast a jump of anywhere from 18% to 22%—depending on what kind of compromise Republicans and Democrats on Capitol Hill are able to reach on a new stimulus package. And the Federal Reserve Bank of Atlanta recently bumped up its third-quarter growth projections from less than 12% to more than 20%, on the strength of new manufacturing data.
Should they come to fruition, those numbers would shatter the previous record of 16.7% annualized quarterly GDP growth, which was set in the first quarter of 1950. Of course, such a dramatic improvement would come with a caveat: the fact that the U.S. economy has been contracting at a historic rate, with GDP down 33% in the second quarter.
Not only did that contraction set a new mark for largest annualized quarterly GDP decline (surpassing the -10% drop experienced in the first quarter of 1958), but it means that any economic growth would be coming from a significantly lower basis—one resulting from an abrupt recession that has wiped out five years’ worth of economic growth.
As a result, 2020 remains on course to be one of the worst years on record for both the U.S. and global economy. The International Monetary Fund recently revised its projections to predict an -8% decline in U.S. GDP in 2020, while it expects global economic output to fall by nearly -5%. Both of those figures are roughly -2% worse than the IMF’s previous projections in April.
Still, all eyes will be on the U.S.’s third-quarter GDP figures, which are due to be released by the Bureau of Economic Analysis on Oct. 29—mere days before the 2020 presidential election.