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The $900 billion stimulus package will lift incomes by nearly $2
trillion (annual rate) in the first quarter, but that support will
dwindle quickly as the year progresses. We estimate the stimulus
package will boost Q1 GDP growth by 4.5 percentage points and raise
the level of GDP in 2021 by 1.3%. Early-year fiscal support will
provide a bridge to the second half of the year, when we expect a
successful COVID-19 inoculation campaign to unlock pent-up consumer
spending that will push GDP growth above 5%.
This month, the worsening COVID-19 pandemic suggested a downward
revision to our forecast of GDP growth in 2021, while the passage
of a significant stimulus package suggested an upward revision. On
balance, and given the timing of the two developments, our
projection of GDP growth in 2021 measured year-over-year has been
revised down, from 4.3% to 4.0%, but as measured 4th quarter-to-4th
quarter, the forecast has been revised up from 3.5% to 4.0%.
Posted 05 January 2021 by Chris Varvares, Vice President and co-head of US Economics, S&P Global Market Intelligence and
Joel Prakken, Chief US Economist and co-head of US Economics, Research Advisory Specialty Solutions, S&P Global Market Intelligence
