The setting for 2021 seems clear: A powerful growth trajectory fueled by an influx of government spending as the U.S. recovers from the Covid-19 crisis and heads into the fastest economic acceleration in nearly 40 years.

The economy is running on a stimulus-fueled caffeine high. What will happen when it wears off?- oil and gas 360

Source: CNBC

But after that, then what?

The path beyond this rocket-fueled year looks far less clear.

One-time spending has rarely been the catalyst for long-term growth. Fiscal and monetary policy that now serve as irresistible tailwinds could soon turn into headwinds. On the other side of this huge burst of activity will be an economy beset by inequality and a two-speed recovery that likely will take more than the occasional government transfer payment.

So while gross domestic product growth in 2021 could reach 7% or beyond, don’t get used to it. An economic reckoning is likely ahead.

“I don’t see growth as being particularly durable,” said Joseph LaVorgna, chief economist for the Americas at Natixis. “The economy is going to slow a lot more next year than people think and probably will be well under 3%.”

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