US GDP: Recovery looks uncertain in H2 2020 – UOB

Senior Economist Alvin Liew at UOB Group gives his opinion on the latest set of US GDP figures for the April-June period.

Key Quotes

“The US economy contracted by 32.9% q/q SAAR (from -5.0% in 1Q 2020) the sharpest decline on record since data were made available in 1947. The previous record was a 10% decline in 1Q 1958.”

“The worst of the 2Q contraction was in April when economic activity ground to a stop as the measures to contain COVID-19 via social distancing, travel restrictions, “stay-home orders” and border closures extracted a heavy economic cost. Private consumption expenditure bore the brunt of the massive decline while business & residential investments and inventories added to the contractions. The positive factors were government fiscal stimulus and net exports which helped cushion a small part of the 2Q growth destruction.”

“We still project a resumption of q/q growth in 2H 2020 (we assume the COVID-19 situation will improve/be partly under control by 3Q) but the rebound (+12.1% in 3Q and 7.4% in 4Q) in the second half of the year will not offset the 1H contraction, so US full-year 2020 GDP is expected to contract by 5.8% (from +2.2% in 2019). This is more optimistic compared to the Fed Reserve’s forecast of 6.5% contraction for 2020 (made in its June 2020 FOMC) and the IMF’s 8% US contraction forecast (made in its June 2020 WEO update).”