Goldman Now Sees Q1 GDP Surging 5% Thanks To $900BN COVID Stimulus

It was just one month ago when Wall Street's best and brightest - which these days also means most clueless - personified in this case by JPMorgan's chief economists, predicted that GDP in the first quarter of 2021 would contract by 1%, effectively putting the US on a collision course with a double-dip recession.

Just before Thanksgiving, JPM economist Michael Feroli wrote that while the economy powered through the July coronavirus wave, "at that time the reopening of the economy provided a powerful tailwind to growth. The economy no longer has that tailwind; instead, it now faces the headwind of increasing restrictions on activity." Meanwhile, "the holiday season—from Thanksgiving through New Year’s—threatens a further increase in cases. This winter will be grim, and we believe the economy will contract again in 1Q, albeit at “only” a 1.0% annualized rate." The bottom line, or rather square, is shown in the table below:

(Click on image to enlarge)

Well, in a world in which even the top economists are blindsided by every single event - events which it is their job to anticipate, predict, and price in - just one month later everything has changed once again and in a note from Goldman's economists this time, we read that contrary to JPM's dour forecasts, Q1 GDP will (should) actually be a great quarter for the economy, and as a result of the just-approved $900BN stimulus bill and ongoing vaccine rollout, Goldman now expects G1 GDP to grow 5.0%, up from 3.0% previously and sees full-year GDP rising to 5.8% (from 5.3% previously), to wit:

President Trump approved a COVID relief package worth roughly $900bn (4% of GDP). The package is slightly larger and comes earlier than the roughly $700bn package we had previously assumed in our forecasts.... we upgrade our 2021 growth forecasts to incorporate this additional fiscal stimulus. 

(Click on image to enlarge)

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