"US Economy to Worsen in Q1 Due to COVID Resurgence, Then Rebound from Q2"

Economic Stimulus Measures and High Savings Rate Expected to Influence Economic Recovery

[Image source=AP Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Economists predict that the U.S. economy, which continues to be affected by the novel coronavirus disease (COVID-19), will fall into a recession in the first quarter of this year due to a resurgence of cases, but will rebound starting in the second quarter. Although there will be some initial difficulties, expectations are growing that the economy will recover as consumer sentiment revives with the distribution of vaccines.

On the 3rd (local time), The Wall Street Journal (WSJ) reported that amid the ongoing COVID-19 crisis that began last year and has extended into this year, economists are expressing optimism about economic recovery. The primary basis economists cite for this recovery is the $900 billion (approximately 979 trillion KRW) stimulus package passed by the U.S. Congress at the end of last year. With President Donald Trump barely signing the stimulus package at the end of last month, unemployment benefits, tenant rent support, and various subsidies that were at risk of being halted will continue to be provided, preventing hundreds of thousands of Americans from facing financial crises for the time being.

Additionally, WSJ reported that the fact Americans have accumulated funds in savings increases the possibility of an economic rebound. According to WSJ, the U.S. personal savings rate was 12.9% in November last year, which is lower than the 33.7% in April of the same year when COVID-19 was spreading, but still higher than the 7.5% savings rate in 2018. Economists expect that as COVID-19 related restrictions are lifted and vaccine distribution expands, consumption will revive based on these savings. The Federal Reserve (Fed) has announced it will maintain near-zero interest rates for at least three years, and economists believe this ultra-low interest rate environment will aid economic recovery.

Richard Moody, Chief Economist at Regions Financial, stated that the recovery depends on consumer sentiment, emphasizing that it hinges on when consumers feel comfortable spending as they did before the pandemic.

However, economists also anticipate that the recovery pattern may differ from past recessions because the current downturn has affected industries differently. They also note that some sectors of society have undergone permanent changes, such as the expansion of remote work and increased digital shopping. Bernard Baumohl, Chief Global Economist at The Economic Outlook Group, said, "I believe 2021 will be a pivotal year of transition for the U.S. economy," while cautioning that uncertainties regarding vaccine distribution remain.

This content was produced with the assistance of AI translation services.