- Economists at Bank of America lifted their forecast for third-quarter US GDP growth to 27% from 15% on Friday, citing better-than-expected trends in retail sales, the housing market, and hiring.
- Yet the firm lowered its fourth-quarter projection to 3% from 5%. Failed stimulus negotiations are growing increasingly likely, and the lack of fresh aid forms a “speed bump” for the US economic recovery.
- The adjustment comes after Senate Democrats blocked Republicans’ $US500 billion measure on Thursday. The parties remain hundreds of billions of dollars apart in their respective proposals’ sizes.
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Bank of America adjusted its second-half forecast for US gross domestic product, reconciling a stronger-than-expected recovery with fading hope for near-term stimulus.
Economists led by Michelle Meyer raised their third-quarter GDP forecast to 27% growth from 15%. Experts already expected the quarter to bring a strong bounce, as reopenings and containment of the coronavirus revived economic activity. Still, indicators including retail sales, home sales, and payrolls data flashed encouraging signs throughout the summer and warranted an official update to the bank’s outlook, the team said.
Yet the economists are less optimistic toward the US economy’s fourth-quarter performance. The team lowered their estimate for the period’s growth to 3% from 5%, citing decreasing odds of a stimulus package being passed before the US presidential election.
Senate Democrats blocked Republicans’ $US500 billion measure on Thursday, saying the measure did far too little to aid Americans. The parties continue to stand hundreds of billions of dollars apart in their respective proposals, leaving little hope for a breakthrough.
“As evident in prior rounds of stimulus, bipartisan cooperation is critical. And with the 2020 presidential election less than two months away, partisanship is only growing,” the team wrote, adding the lack of fresh aid presents a “speed bump” for the nation’s recovery.
Other banks have adjusted their GDP forecasts throughout the week following new economic data releases. Goldman Sachs raised its third-quarter growth estimate to 35% on Thursday. The firm’s economists cited the August jobs report, which showed the US unemployment rate beating expectations and falling to 8.4% last month from 10.2%.
Morgan Stanley lifted its full-year GDP forecast to -3.4% from -5.3% on Tuesday. The firm’s more positive outlook was largely founded on the expectation that Congress will pass a stimulus measure deploying $US1.5 trillion to $US2 trillion in aid this month. The report came before Thursday’s Senate vote.
Morgan Stanley sees third-quarter GDP growth hitting 32.6% and fourth-quarter growth landing at 9.3%.
A Bloomberg survey of economists projects a 21% economic expansion in the third quarter.
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