Economy Could Take Major Hit To Start 2021 Due To This

Dual Georgia Senate runoff election will determine the balance of the Senate. Dems need to win both to tie the Senate. A tie is a win for the Dems because the Vice President is the tiebreaker. That election is on January 5th.  Both elections are a toss-up. Some guess it will split, but we won’t get a good idea until there is more polling in December.

Mixed Economic Forecasts

There are mixed economic forecasts for the next few months. If you just take into account the latest data and markets, you will be optimistic, but if you assume COVID-19 hurts the economy and the vaccines don’t stop the spread soon, it’s clear that there will be a mini slowdown. JP Morgan is forecasting a 1% decline in Q1 GDP. They also see a quick recovery due to the vaccine as they predict 4.5% and 6.5% growth in Q2 and Q3.

Economists are wavering between whether the worst quarter of this slowdown will be Q4 or Q1. October was a decent month for the economy and November is looking ok. If only December is bad, Q1 growth might not be terrible. On the other hand, there will be no benefit from the vaccines. 

Government agencies are stating vaccines could start going out in 8 weeks. January and February should have a lot of cases and shutdowns, but the vaccines should build up their impact throughout the quarter. March might have an economic rebound.

Atlanta Fed GDP Nowcast predicted 5.8% growth as of November 18th. That’s because October was a good month and early indications are that November wasn’t terrible. NY Fed weekly economic index in the week of November 14th improved from -2.96 to -2.84. 

It was the slowest pace of improvement in 4 weeks. But the point here is the economy still improved in the first half of November. Through the 20th, we only have a “lockdown light.”

As you can see from the chart above, the ECRI weekly leading index’s growth rate improved in the week of November 13th. The index was up from 143.8 to 141.9 and the growth rate increased from 7.4% to 8.6%. It’s definitely helped by the stock market. 

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