To reiterate, this Thursday morning we expect the government to report a huge, and virtually unprecedented, surge of a 33.4% annualized growth rate in real GDP growth for the third quarter...Obviously, the US will not keep growing at this rate, but the question remains about how much might it slow?
There is nothing normal about the 2020 recession. Massive nationwide shutdowns of “non-essential” businesses caused real GDP to drop at a 31.4% annual rate in the second quarter, the biggest drop since the 1930s. However, as we expected, a V-shaped recovery is being traced out. On October 29th, in ten days, we expect a report that says third-quarter real GDP rebounded at a 33.4% annual rate.
COVID lockdowns crushed the economy in the first half of 2020, with real GDP down 5.0% at an annual rate in the first quarter and 31.4% at annual rate in the second quarter, ...But for the third quarter, the US is tracing out a V-shaped bounce and likely grew somewhere between 30 - 35% at an annual rate, the fastest increase in real GDP for any quarter since at least World War II.
Again, inflation averaged 1.5% over the past ten years with no serious consequences to the economy. By allowing inflation to average 2.5% over the next ten years, how does that change the past? The answer: it can't!...What it does do is change the future. In essence, the Fed is saying they really don't have a 2% inflation target, they have a target above 2% for the foreseeable future. And this is worrisome
The competition between states that open and those that don’t – at the political, business, sports, school, and even family level – will lead to even more opening of the economy in the months ahead. For a self-sustaining recovery to fully catch hold, it is reopening, not additional stimulus, that is the key.
The Long Slog Recovery! The bottom line is that a full economic recovery in the US is still multiple years away. The surge in growth in the third quarter is largely related to many businesses going from a total lockdown to a new COVID-19 normal. Production and construction six feet apart, no fans in the stands, and 50% occupancy.
As we near the end of the third quarter, key economic reports will be released that will influence our forecast for third quarter real Gross Domestic Product. It will be a very strong quarter. We expect a 25% "annualized" growth rate in Q3.
What policies could the US put in place to limit the damage to future generations from all this borrowing? If we are asking our children and grandchildren to pay for this, are there things we can do that boost growth and limit the odds of more bailouts ahead?
The key lesson in all this should be that it is a fool's errand to try to time the market. Imagine being told on February 15 that the world was about to be hit by a widespread virus for which there was no known therapy or cure, that governments were going to react by shutting down massive swaths of their economies, ...
the long road to recovery has started and, for now, we're penciling in real GDP growth at a 20% annual rate for the third quarter. Of all the parts of the US economy that have weathered the COVID-19 storm, none has been as resilient as the housing market.