Recovery remains fragile
Positive Trends Emerge in U.S. Despite Lingering Headwinds
After a record decline in gross domestic product (GDP) in the second quarter, economic data improved rapidly as states reopened. Employment, manufacturing and retail sales data remain positive, but the pace is slowing. In our view, significant headwinds linger. We’re concerned that waning fiscal support, potential surges in the number of coronavirus cases and political uncertainty may prolong the recovery. Growth may not return to pre-virus levels until late 2021.
Rebound Slows in Europe
A record downturn in European GDP gave way to a robust rebound as the region’s economies reopened. However, the recovery is fading amid slowing manufacturing and retail sales, deflation worries and a COVID-19 resurgence in Spain, Italy and France. The U.K.’s economic recovery likely will slow, too, as temporary programs to prop up growth expire and another coronavirus lockdown looms. We expect growth in Europe to return to pre-virus levels in late 2021 or early 2022.
China’s Economy Bounces Back
China’s economy returned to expansion mode as the nation eased its coronavirus restrictions. Nevertheless, weak global demand and heightened trade tensions with the U.S. and Europe likely will continue to fan economic headwinds. Furthermore, rising COVID-19 infection rates in certain emerging markets (EM) countries, along with deglobalization trends, continue to challenge China’s economy.