1.Our forecasts of year-over-year real GDP growth for 2021-22 have been revised up,from 5.7% and 4.1%,to 6.2% and 4.3%,respectively.1 These are above the 12 March Blue Chip consensus figures of 5.7% and 4.1%,but we expect the consensus to rise in response to recent developments and as more forecasters assess the potential impact of the now-enacted American Rescue Plan.2One factor in our revisions was the strength in credit/debit card spending through mid-March,even before the Treasury Department began disbursing the latest round of stimulus checks on 17 March.In addition,most checks were delivered in March,not April as we had previously assumed,helping boost our estimate of first-quarter PCE growth from 4.7% to 9.2%.3More important is the acceleration of the inoculation campaign.Last month,extrapolation of the then-current pace of inoculations implied 90% of the US population would be vaccinated by next February.This month,that projection has improved to this July,and many states are relaxing containment measures.This encouraged us to revise up projected growth of PCE on services other than housing,utilities,and healthcare to nearly 20% at an annualized rate over the last 3 quarters of this year.4The impact on GDP growth of a faster recovery in spending on services is partially offset by an assumed faster decline in the share of goods in PCE to the pre-pandemic trend.5President Biden has unveiled his American Jobs Plan(AJP)to spend $2.1 trillion on social investments,paid for over 15 years with higher corporate taxes.Given its uncertain political prospects,we have not(yet)included AJP in our base projections.A further fiscal expansion is an upside risk to the forecast.Preliminary estimates suggest implementation of the full AJP could boost GDP growth by 0.3-0.4 percentage point from 2022 through 2024.6The principal downside risk to the forecast is that rapid spread of viral mutations,combined with the premature relaxation of personal and public health precautions,will force renewed shutdowns in certain regions of the country.
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