US: GDP forecast to expand 6.8% in 2021 – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest preliminary figures for US Q2 GDP.

Key Takeaways

“US 2Q 2021 GDP increased by 6.5% q/q SAAR, accelerating slightly from the revised 6.3% expansion in 1Q, but well missing Bloomberg and our forecasts. Note that the BEA also revised the 2020 full year GDP contraction slightly to -3.4% (from -3.5% previously).”

“Growth in 2Q was fueled by government stimulus, as the US vaccine rollout proceeded at a rapid pace helping the re-opening of many parts of the economy while monetary policy remained very accommodative. But challenges in keeping inventory stocked and bottlenecks in production likely have curbed the pace of growth.”

“The growth in 2Q was again largely attributed to the strength in private consumption, while business spending also contributed, albeit a much smaller share of the overall growth. Several components dragged on US headline GDP growth including residential investments, government’s consumption expenditure & investment, private inventories and net exports of goods and services.”

“On balance, we remain positive about US outlook despite fears of a COVID-19 driven correction. That said, the growth trajectory remains uncertain (i.e. the tapering in the take-up rate of vaccination demand and COVID-19 Delta variant) but for now we still project US GDP will extend its rebound at a slightly faster pace in 2H. The US full-year 2021 GDP is still expected to expand by 6.8%, which is slightly below IMF’s recently revised projection of 7% US growth.”