The economy is poised to grow at its fastest pace since 1984. With a recovery that brisk, expect plenty of strange developments along the way.
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They call economics the dismal science, and Diane Swonk normally exemplifies her profession’s penchant for gloominess. “People say, ‘You’re always talking about the downside,'” Swonk, the chief economist at the tax firm Grant Thornton, told me one recent afternoon. “Well, it’s my job to hedge the downside.”
But as the economy emerges from a pandemic of historic proportions, Swonk has reached a surprisingly upbeat conclusion about what’s going to happen next. The US economy, she believes, is poised to grow 6.6% this year. Even more startling, her peers are in broad agreement: Economists surveyed by Bloomberg this month forecast a median GDP growth rate of 6.2%.
These are astonishing numbers, the kind you just don’t see in developed economies – almost ever. “It’s mind-boggling, even for me,” Swonk said. “And I’ve been doing this a long time.” The last time gross domestic product increased that quickly was 1984, when Swonk was still in school and I was three years from being born.
Swonk says the boom this time will be like the 1984 expansion but “on steroids.” Economists are forecasting such fast growth partly because the downturn in the pandemic was so steep – the 3.5% GDP decline in 2020 was the worst year for the economy since 1946. Yet the improved outlook is also being driven by a confluence of factors – from stimulus checks to low interest rates to accelerating vaccinations – that are convincing Americans to spend more than economists were expecting just a few months ago.
According to the latest projections from the International Monetary Fund, the economy is on track to return to its pre-COVID trajectory by the end of this year. Things look so good, in fact, that the greatest threat to the near-term outlook (short of some horrific vaccine-resistant variant of the coronavirus) is that it ends up being too