Larger Stimulus Leads to Big Upgrade to U.S. Growth Forecasts

With Covid-19 cases stabilizing and Democrats oiling the tracks to pass large parts of President Joe Biden’s $1.9 trillion stimulus plan -- even without Republican support -- economists are raising their 2021 economic growth forecasts.

Expectations for gross domestic product growth increased for the current three-month period and every subsequent quarter through mid-2022 in the latest survey of economists by Bloomberg News. Economic growth this year is estimated to be the strongest since 1984.

GDP is projected to rise an annualized 5.6% in the second quarter and 6.2% in the third -- both 1.6 percentage points stronger than January estimates, according to the median forecasts in a Feb. 5-10 survey of 76 economists.

“I think there’s going to be very strong growth in both the second and third quarters,” said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC. He expects roughly $1.5 trillion in stimulus to be passed and for annualized GDP growth to jump to nearly 10% in the the April to June period. “I’m quite optimistic that the economy’s going to be able to reopen in the spring.”

The upgraded economic growth forecasts reflect expected increases in consumer spending and business investment. The pace of household spending is seen climbing at a 6.8% annualized pace in the July-September period amid a third round of stimulus checks, more widespread vaccinations and a rebound in demand for many services.