With Democrats on the verge of passing an almost $2 trillion stimulus bill and Covid-19 vaccinations moving ahead, the US economic outlook is much sunnier than it looked in early January.
The latest Bloomberg monthly survey of economists shows the annualized pace of growth in the first quarter will be 4.8%, twice as fast as respondents expected just two months ago. For the full year, gross domestic product is projected to rise 5.5%, which would be the fastest since 1984 and is up from January's estimate of 4.1%.
After January's key run-off elections in Georgia, where Democrats secured two Senate seats to win slim control of the chamber from Republicans, economists were generally penciling in a pandemic relief package worth around $1 trillion. Democrats stuck together to push through a bill almost double that size; no Republican senators voted for the plan on Saturday. The measure next goes back to the House for a final vote, expected to be Tuesday.
President Joe Biden, speaking Saturday after the Senate vote, looked for a major boost to the economy.
"This will create millions of new jobs," Biden told reporters at the White House. "It's estimated over 6 million new jobs by itself; increase the gross domestic product by a trillion dollars."
"As tough as this moment is, there are brighter days ahead -- there really are," Biden said. "It's never been a good bet to bet against America."
An additional round of $1,400 stimulus checks for millions of Americans, combined with supplemental jobless benefits and the acceleration in vaccinations, should help sustain growth throughout the year, said Stephen Stanley, chief economist at Amherst Pierpont Securities LLC.
Government stimulus will "give a shot of adrenaline for a short period of time," Stanley said. He noted that "it will kind of fade out, and the more fundamental aspect of things, which is really just opening up and getting back to something closer to the pre-pandemic norm for activity, should kick in."
The Bloomberg survey of 67 economists was conducted Feb. 26 to March 3.
While economic growth is primed for a strong 2021, it could also mean another partisan divide over the next item on Biden's legislative agenda: a multitrillion-dollar plan focusing on infrastructure.
What Bloomberg Economics Says...
Easing activity restrictions and rising vaccinations will allow consumer spending to regain its long-held status as the key economic engine this year. While another round of stimulus is set to push growth to its pre-pandemic trend by midyear, a stealth buildup of $1.7 trillion in extra savings means even more dry tinder for spending.
-- Yelena Shulyatyeva and Andrew Husby, economists
Democrats hope the package could get bipartisan support, but Republicans -- and possibly some moderate Democrats -- are likely to be concerned about how the proposal would be funded, certain add-on provisions, and the size of the overall plan, especially if the economy shows sustained progress in the coming months.
Recent reports have shown broad economic improvement in the US Retail sales rose in January by the most in seven months, and a measure of US manufacturing expanded at the fastest pace in three years in February.
The labor market, which has been slower to recover, showed a higher-than-expected employment gain in February, though jobs remain well below pre-pandemic levels.
Meanwhile, the daily rate of vaccinations has quadrupled and new coronavirus infections have plummeted since early January. Governors in Texas and Mississippi -- despite criticism from health experts -- announced plans to lift coronavirus-related restrictions entirely, citing a decline in hospitalizations and an increase in inoculations.
Getting the pandemic under control is still key to the economic recovery, "and then the checks, and the money -- all this stuff will accelerate it really quickly once you've done that," Heather Boushey, member of the White House Council of Economic Advisers, said in an interview.
Disclaimer: This article first appeared on bloomberg.com, and is published by special syndication arrangement.