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US gross domestic product: Actual vs. potential output

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The discussion around economic growth going forward will be somewhat difficult and definitely misleading. The current Bloomberg consensus on third quarter growth in gross domestic product is 18% (RSM’s forecast is 14.2%), and that will likely be brought down noticeably in the coming days.

The economy has moved sideways over the past six weeks and looks as if it is stalling. Through July 19, U.S. household consumption has declined by 6.4% relative to January levels, with upper-income consumers reducing spending by 9.8%, middle-income consumers by 5.3% and lower-income consumers by 2.3%.

V stands for vaccine, not the shape of the recovery. No vaccine, no recovery.

Should policy support be reduced, the decrease in spending will accelerate and the difference between actual and potential output will remain wide. V stands for vaccine, not the shape of the recovery. No vaccine, no recovery.

The accompanying data visualization from our vantage point illustrates the long and difficult road to recovery. Following the near 33% decline in second-quarter gross domestic product, even an 18% rebound would leave us far short of potential.

For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.