THE CONFERENCE BOARD ECONOMIC FORECAST FOR THE US ECONOMY

Real GDP growth will
probably rise by 3.5 percent*
(annualized rate) in 4Q20 and
2.0 percent** in 1Q21 as the US
economy continues to wrestle
with the COVID-19 pandemic.
While the economy has
partially rebounded from
a deep contraction in the
first half of 2020, a variety of
factors will determine how
the recovery unfolds in 2021.
Key variables include: a) the
scale of the ongoing COVID-19
resurgence and any resulting
lockdowns, b) the deployment
and effectiveness of COVID-19
vaccines, c) the size and
timing of fiscal stimulus, d)
the status of labor markets
and household consumption,
and e) the degree to which
volatility in the US political
transition affects consumer
and business confidence.
While there are many possible
outcomes for these factors,
The Conference Board has
generated three potential
recovery scenarios based on
specific sets of assumptions.

Base Case Forecast

Our base case forecast yields
1Q21 real GDP growth of 2.0
percent* (annualized rate),
and an annual expansion of
4.1 percent for 2021, following
an annual contraction of 3.5
percent for 2020. We view

this scenario as the most
probable. It assumes: a) new
cases of COVID-19 peak in
early 1Q21 but no widespread
lockdowns are implemented,
b) vaccines are deployed
gradually in 1Q21 but volumes
accelerate into 2Q21, c) the
December 2020 stimulus
package is fully deployed
in 1Q21 and an additional
stimulus package is deployed
in 2Q21, d) labor markets
and consumption weaken
slightly in 1Q21 but rebound
in 2Q21 and 3Q21, and e) the
political transition does not
result in a hit to consumer or
business confidence. These
assumptions yield a lull in the
recovery in 4Q20 and early
1Q21, but a steady acceleration
of economic activity that
peaks in the summer months
as consumers eagerly spend
on services and goods that
they had forgone in 2020.
In this scenario US monthly
economic output returns
to pre-pandemic levels in
August 2021.

Upside Forecast

Alternatively, we offer a
second more optimistic
scenario in which the
economy grows 6.4 percent
for 2021, following an annual
contraction of 3.5 percent for
2020. This scenario assumes:

a) new COVID-19 cases fall
dramatically in late 1Q21 and
social distancing policies loosen,
b) vaccines are deployed rapidly
in 1Q21 and universally available
in early 2Q21, c) the December
2020 stimulus package is fully
deployed in early 1Q21 and an
additional stimulus package is
rolled out in late 1Q21 / early
2Q21, d) a strong rebound in
consumption and employment
in 1Q21, and e) the political
transition does not result in a
hit to consumer or business
confidence. In this scenario
US monthly economic output
returns to pre-pandemic levels in
April 2021.

Downside Forecast

Finally, we offer a third more
pessimistic scenario in which
the US economy contracts in
1Q21 before stabilizing over the
summer. This scenario yields
annual growth of 0.8 percent in
2021. It assumes a) a large spike in
COVID-19 cases in 1Q21 resulting
in widespread lockdowns, b) a
lengthy vaccines distribution
period and / or vaccine
ineffectiveness against new
COVID-19 strains, c) no additional
fiscal stimulus in 2021, d) a

deterioration in unemployment
and consumption in the first
half of 2021, and e) a very
volatile political transition
that disrupts business and
consumer confidence. Under
this scenario US monthly
economic output does not
recover to pre-pandemic levels
until sometime in 2022.

* The Conference Board is
upgrading its forecast of 4Q20
real GDP growth from 2.8
percent (annualized rate) to 3.5
percent (annualized rate). This
upgrade is due to stronger than
expected economic indicators
in November and December.

** The Conference Board is
upgrading its forecast of 1Q21
real GDP growth from 0.7
percent (annualized rate) to 2.0
percent (annualized rate). This
upgrade is due a second round
of stimulus that was passed in
December, continued progress
in the deployment of multiple
COVID-19 vaccines, and a
stronger than expected growth
hand-off from 4Q20