As 2021 begins, A variety of economic forecasters are upping
their outlooks for the year based on a second round of coronavirus relief from
Congress and the rollout, albeit it slowly, of a handful of COVID-19 vaccines.
While cases of the disease continue to climb, along with
death totals that have passed 350,000 in the United States, many analysts see
the economy returning to pre-pandemic levels this year. Continued support for
low interest rates from the Federal Reserve, supplemented by a last-minute $900
billion relief package from Capitol Hill, are key ingredients underpinning the
Changes in consumer behavior, including an increase in
personal savings and personal income as a result of the $2 trillion stimulus
package passed last March coupled with increased home equity from rising home
prices, also leave many households actually better off than they were when the
pandemic struck almost a year ago.
In April, as a nearly nationwide shutdown took hold, the
personal savings rate shot up to 33.7% and still remains elevated, at 12.9% as
of November. In December 2019, just as the virus was being discovered in China,
it stood at 7.2%.
"The elevated level of personal savings represents a
lot of pent-up demand for things like travel and entertainment that could be
unleashed in the second half of 2021 pending widespread vaccinations,"
says Greg McBride, chief financial analyst at Bankrate. "While the savings
rate is impressive, it is not indicative of the majority of households but
rather has happened largely at the upper end of the income and wealth scales.
That being said, in the long run the more Americans that have a savings cushion
to fall back on, the better."
Goldman Sachs estimates that global gross domestic product
has recovered about 75% of the loss experienced in the first half of 2020 and
that shutdowns related to the pandemic are only dragging the global economy
down about 8% from pre-pandemic levels compared to 20% at the peak of last
"We expect a large rebound in (the first half) on the
back of widespread immunization – with 50% of the population expected to be
vaccinated by April – and forecast above-consensus 5.3% growth in 2021,"
the firm wrote in mid-December.
Not that everything is rosy. The employment picture is still
far from what it was in early 2020, when the unemployment rate reached a record
low of 3.5%. Still, Goldman forecasts it to drop to 5.2% in 2021 from its
Markets continue to trade near record levels and Wall Street
firms such as JPMorgan see changes in work and consumer behavior driven by
adjustments to the COVID-19 pandemic driving the economy and markets going
Key among those are the ongoing digital transformation of
many industries and activities, innovations in health care and a move to a more
"Digital transformation was the defining market trend
of 2020 as businesses, consumers and families learned how to live in an online
world," JPMorgan wrote in its recent 2021 outlook. "Even so, we are
just beginning to see the ways in which technology will influence future
production and consumption."
The evolution of 5G wireless technology is one of those key
drivers, In 2021, JPMorgan expects the number of 5G smartphones purchased by
consumers to double to 450 million while its use in manufacturing environments
In health care, a major push will come from more widespread
and advanced use of diagnostic testing. The need for rapid and affordable
testing was highlighted by the presence of a global virus, but advances will
come in other areas such as liquid biopsies that can diagnose cancers a year
earlier than current tests.
Goldman says 2021 "could well be a tipping point for
adopting new ways to maximize resources in the areas of energy and food
production. Stocks tied to clean energy and next generation or electric
vehicles soared in 2020 by 100% and 33%, respectively.
Emerging trends in agriculture include growing food
vertically indoors, which allows a greater amount to be grown in the same
amount of space and also the ability to create specific climates for certain
The coronavirus and its resulting lockdowns, the firm notes,
exposed issues with food insecurity, access and waste.
The positive tone for 2021 is not without some caveats.
Increasing tension between China and the U.S. over technology and the country's
military expansion are among the top concerns, along with the nuclear ambitions
of Iran and North Korea. And the continuing divide among voters in America is
also mentioned as a risk.
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