US Economic Recovery

Thankfully it looks like the American economy is recovering, as is that of China.  This is having a domino effect on optimism for the global market as IMF’s Managing Director Kristalina Georgieva explained:

“While the outlook has improved overall, prospects are diverging dangerously not only within nations but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two engines — the US and China.”

Thanks to vaccinations and more US stimulus money the IMF is predicting economic growth at 5.5 percent for this year. Further, there were over 900,000 jobs added in America in March which is the largest leap since August.  As RSM US Chief Economist Joseph Brusuelas said:

“An American economy about to regain its swagger after a year of pandemic-induced crisis was on full display in the March jobs report.”

Furthermore, according to a recent CNN Report based on IMF predictions:

“At $1.9 trillion, the Biden administration’s new fiscal package is expected to deliver a strong boost to growth in the United States in 2021 and provide sizable positive spillovers to trading partners.”

With the increase of Americans’ purchasing power, this will positively impact international consumer spending as they purchase French fashion, Italian cars, Australian precious metals, etc.

US Economic Performance

According to the IMF, it is anticipated that America’s economy is on track to fare better than that of Canada, Germany and Japan.  Predicted contraction rates are:

  • America: 4.4 percent
  • Japan: 5.3 percent
  • Germany: 6 percent
  • UAE: 6.6 percent
  • Canada: 7.1 percent
  • France: 9.8 percent
  • UK: 9.8 percent

It is thought that the “macroeconomic good fortune” of the United States can be attributed to Washington’s spring stimulus. Plus, America does not have to rely on exports for its growth since such sales only account for 12 percent of US GDP.  This is pretty low when you look at the 32 percent in Canada, 47 percent in Germany and 18 percent in Japan. According to Moody’s Analytics Mark Zandi the greater flexibility of America’s labor market helps as:

 “Americans are more willing to adopt new technologies, to move for a job, and [to] make big changes in how they live and work.”

This is good news for the US economy.

COVID-19: Fiscally Recoverable?

We know that the global COVID-19 crisis is hitting firms and individuals very hard in many ways, not least of all financially.  What economic experts and financial organizations saying about this?

On the one hand, Kristalina Georgieva, IMF Chief, points out that there has not been a fiscal crisis this bad for over a hundred years, since the Great Depression.  She believes it to be “the worst crisis since the Great Depression a century ago,” and not only that, but there will likely be lasting damage.

In the space of merely three weeks, 17 million US employees are now hitting the unemployment line.  New York Federal Reserve Bank economists are thus comparing this to a natural disaster (such as a massive earthquake) as a standard financial crisis usually happens over a longer period of time.  However, given that there are not the same physical consequences, it is believed that a faster economic recovery will be more likely.

Former US Treasury Chief Economist and Peterson Institute for International Economics  contributor Karen Dynan – while noting the 20 percent plummet in the US economy in April and May – is predicting a 7.2 percent rebound in the US economy next year, year-over-year.

Further, on the other hand, some economists are predicting a “solid rebound” once people can get back to work.