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The U.S. economy is within reach of a nearly full recovery by the end of the year, said St. Louis Fed President James Bullard on Thursday.
The economy is expected to have rapid growth in the third quarter, reversing the steep decline in the April-June quarter when the pandemic shut down the economy.
Economists now expect strong growth in the July-September quarter. If this continues in the fourth quarter, Bullard said the U.S. could return to the average level of national income, one way to measure the broader economy, in 2019. For instance, if GDP grows at a 35% rate in the third quarter, it would need growth at a 10% rate in the final three months of the year to hit that level.
Such a forecast is “a little bit outside of what even the optimistic forecasters are saying but I wouldn’t put it out of the realm of possibility that you could have the fourth quarter GDP close to our average for 2019 and that would be a great outcome for the U.S. economy,” Bullard said, in a speech to the Global Interdependence Center.
Economists surveyed by MarketWatch expect third quarter GDP will grow at a 25% annual rate as it snaps back from the worst of the shutdown, and they believe the fourth quarter will see growth at a slower 6% pace.
The economy plummeted by a record 31.7% rate in the April-June quarter.
The government won’t release the first estimate for third quarter growth until Oct. 29.
The St. Louis Fed president cautioned that downside risks remain substantial and things could go wrong.
Earlier this week, Bullard said he didn’t think a new Congressional coronavirus relief package was as much of an “imperative” as it might have been in July or August.
“It seems like, at least in some broad macroeconomic type of calculation, we have enough resources to cover this,” Bullard told Bloomberg.
Many other Fed officials, including Fed Chairman Jerome Powell, have urged Congress to pass another spending package.
“I’m more optimistic than most,” Bullard said. Another fiscal package might come early next year, he noted.
Stocks moved higher in afternoon trading with the Dow Jones Industrial Average DJIA, +0.86% up 134 points.
