US GDP growth in the fourth quarter of 2020 slowed down to 4.0% from 33% in 3Q. The economy has lost decent momentum due to tighter sanitary restrictions in the winter, but early signals indicate a strong start in 2021. Among the factors that investors are counting on are $ 600 stimulus payments, easing restrictions in economically active regions such as California, and the vaccination program which is gaining momentum.

US GDP Growth Forecast in the first quarter of 2021 for January 29 from NY Fed

Markets were expecting an increase of 4.2%, however, the consumer component let down, which, due to covid restrictions, grew by only 2.5%. Investments were growing well, both investment in housing (+ 33.5%) thanks to a decrease in mortgage rates and in fixed assets of firms and enterprises (+ 13.8%). This suggests that the covid has failed to deal a major blow to consumer confidence and the business climate in the United States.

For the full year of 2020, GDP contracted by 3.5%, but now the economy is only 2.5% below pre-crisis levels, which is impressive given the scale of US lockdowns in the spring of 2020 and subsequent restrictions.

High-frequency data from tracktherecovery.org suggests that stimulus payments that began on January 4th have sharply increased consumption in January, so much so that it is presumably 6.5% higher than the January 2020 level:

Compared to January 2020, US consumer spending could grow by 6.2%

The pace of vaccinations in the United States has risen to 1 million vaccinations per day and President Biden has pledged to increase resources to accelerate the process to 1.5 million or even 2 million per day. Also, spring is approaching and the data shows that the rate of hospitalizations is decreasing, so opening the economy in the second quarter of 2021 becomes an increasingly realistic prospect.

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