US GDP is now seen contracting 3.8% in 2020 – UOB

Alvin Liew, Senior Economist at UOB Group, assesses the latest GDP figures in the US economy.

Key Quotes

“The US released its best-ever quarterly economic report as the 3Q 2020 GDP, surged by 33.1% q/q SAAR (from -31.4% in 2Q and -5.0% in 1Q 2020), the largest output gain on record since data were made available in 1947.”

“The 2Q rebound was attributed to the “continued efforts to reopen businesses and resume activities that were postponed or restricted due to COVID-19” (as reported by BEA), the Federal Reserve’s rapid easing response to the pandemic and most importantly, the government’s US$3 trillion of fiscal stimulus. Private consumption expenditure accounted for the bulk of 3Q’s growth surge while business & residential investments and inventories added to the headline growth.”

“We now project flat growth in 4Q 2020 (i.e. 0% q/q) but the rebound in the second half of the year will still not offset the 1H contraction even though it is less severe than previously projected. The US full-year 2020 GDP is now expected to contract by a smaller 3.8% (from the previous projection of -4.5% made in September)…We continue to expect the US GDP to rebound at an above-potential rate of 2.8% in 2021.”