U.S. is Set to Boom, Zoom, and Consume

Remember that iconic photo signifying the end of World War II, with sailors kissing nurses in New York’s Times Square?

Don’t expect quite that much exuberance this year, but Americans are throwing open their doors, getting out of the house, and starting to party like it’s 1945! To be sure, COVID remains a global public health threat and continues to spread in many countries. But in the U.S., consumers are spending again, and the American economy is awakening from its artificially induced slumber.

“We are seeing huge pent-up demand and are all likely to underestimate both its magnitude and duration,” says Chris Buchbinder, a portfolio manager for The Growth Fund of America®. “As we’ve seen in Israel, China and other countries, as you get the virus under control, new cases plummet and activity rises rapidly, so I expect the economic rebound we are seeing in the U.S. to ramp up dramatically.”

Thanks largely to rising consumer spending and trillions in government stimulus, U.S. gross domestic product rose an annualized 6.4% in the first three months of the year, and total U.S. economic output could return to pre-pandemic levels by the end of 2021, years ahead of earlier expectations.

In fact, the International Monetary Fund (IMF) expects 6.4% U.S. GDP growth for all of 2021 — more than double a January estimate of 3.1% after U.S. household income growth soared to a record 21.1% this March.

“The recovery always came down to whether there would be enough stimulus to sustain us through the shutdowns,” says Capital Group U.S. economist Darrell Spence. “And with the vaccine rollout compressing the time between stimulus and the functional end of COVID, we could see even stronger growth than the market expects today.”

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*Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. Economic forecasts set forth may not develop as predicted. No strategy assures success or protects against loss.