Q3 COVID Recession Update – A Slow Recovery Ahead

Article By : Strategy Analytics

Recovery will not return economies to Pre-COVID Levels until 2022...

In its most recent Q3 economic scenarios, Strategy Analytics predicts US and Western European economies will remain between -4% and -6.6% below the levels for Real GDP at the end of Q4 2019 by the end of 2021.

The economic COVID-induced shockwave created in Q1 and Q2 has left major economies severely depressed. COVID continues to assert its influence in reducing economic recovery globally. There is no effective way to control the virus and resultant infections other than diligence and restraints of normal behaviors.

Job losses continue and consumer confidence has sagged after some improvement in June. While governments in the US and Europe have pumped massive levels of stimulus funding for businesses and individuals, the challenge is predicting the path forward in 2H 2020 and in 2021.

This report updates our economic outlook analysis and measures the impact of Covid-19 through 2021 and beyond.

“The recession is technically over and after the historical declines from the Q2 lockdowns, there is definitely a bounce upward in June and July. The bounce is expected to be short-lived and continued recovery in Q4 and Q1 2021 may be weak,” said Harvey Cohen, President of Strategy Analytics.

In response to continuing questions about the strength of the consumer as well as the conditions facing B2B market, Strategy Analytics through its Consumer Insights Practice is regularly developing scenarios based on perspectives from global forecasting resources. “We do see some bright spots in smartphones, Smart Home, and even in automotive technologies. The overall economic picture is weak. COVID was responsible for the dramatic downturn, COVID continues to exert a detrimental drag on global economies, and there will be no return to normal economic conditions until this COVID drag is eliminated,” added Cohen.

Scenarios for COVID improvement begin with the availability of an effective vaccine which, optimistically, is expected by year-end 2020. Hesitancy among the US population to be early adopters of a vaccine accelerated into production may lengthen the period for significant immunization until mid-2021. By that point, the protracted period of high unemployment, weakened consumer balance sheets, and weakened sectors in the US economy will make strong growth difficult.

“We believe we are in a ‘Deep-W’ or ‘Wide-V’ recession where the extraordinary decline of 10% in real GDP in Q2 produces significant damage aggravated by continuing COVID waves that makes for a slow recovery in our scenarios with Real GDP down between -6.6% and -9.2% for the US in 2020,” Harvey Cohen continued.

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