According to the economists at JPMorgan, the US economy will most likely shrink in the first quarter as the pandemic is worsening and curfews are being enforced again. Moreover, another fiscal stimulus from Congress is not in sight either.
JPMorgan predicts that by early 2021, the GDP will drop down to a negative value. They also added that a brutal winter is to follow as people continue to dismiss pleas from healthcare professionals to avoid large social gatherings for Thanksgiving celebrations this year.
The US economy saw a record annualized growth rate of 33.1% in the third quarter. However, now the GDP is likely to drop to 2.8% in the fourth quarter and following this, a decrease of 1% will be seen in the first few months of next year.
The rate of daily coronavirus infections has risen to above 141,000. Around 12.3 million cases have been reported along with a death toll of almost 257,000.
Several states are implementing strict restrictions again as public schools in New York have been shut down. Moreover, Ohio and California have imposed a curfew and Illinois has limited the operations of restaurants and businesses, and the National Zoo is being shut down as well. These factors will contribute to the shrinking economy.
Republicans and Democrats are in a deadlock on the decision of releasing a new stimulus package, which could result in the precious benefits expiring by the end of this year and 12 million Americans will be affected due to this. Many economists have criticized Congress for delaying the stimulus and neglecting their duty.
Moreover, the Treasury Department has pulled $455 billion in funds from the Federal Reserve that was being utilized for emergency lending programs.
Three companies, including Pfizer, Moderna, and AstraZeneca made recent announcements that early results of their trials have shown that their vaccine is effective. The companies have applied for emergency authorization by the Food and Drug Administration (FDA).
The economists at JPMorgan believe that even though distributing the vaccine will be a time-consuming process, it will help in reviving the industries most affected by the pandemic such as hotels, airlines, restaurants, and movie theaters.
These vaccines will help reduce the amount of damage suffered by the economy. In the second and third quarters, the economy is likely to grow rapidly at an annualized rate of 4.5% and 6.5%.
A few industries are thriving such as real estate, due to extremely low mortgage rates.