The nonpartisan Congressional Budget Office (CBO) has revised downward its January economic forecast for the U.S. from 2020 to 2030 by $7.9 trillion, or 3 percent of the GDP it had previously expected during the decade.
U.S. GDP is unlikely to restore all of that $7.9 trillion until 2029’s fourth quarter, the CBO said.
In the final quarter of this year, the U.S. GDP should be 5.6 percent lower than a year earlier, the CBO predicted, a sharp increase from its January forecast of a 2.2-percent contraction.
The U.S. Institute for Supply Management survey registered 43.1 in May, up slightly from its record low of 41.5 percent in April, but still well below a score of 50 that would indicate confidence in manufacturing’s short-term future.
Most respondents said production and new orders dropped from April into May; 40 percent said they were laying off workers in May.
Meanwhile, U.S. imports fell 13.7 percent in April and exports dropped 20.5 percent, the biggest monthly losses for both since records began being kept in 1992. At the same time, the trade deficit ballooned to $41.4 billion.
Global Gloom
Manufacturers in India and South Korea laid off a record number of workers in May. South Korea’s export orders fell 23.7 percent last month from a year earlier, following April’s 25.1-percent drop.
Germany’s Purchasing Manufacturers Index edged up in May from 34.5 to 36.6, still far below 50, the cutoff between growth and contraction; Japan’s index fell from 41.9 to 38.4.
While China’s Caixin index of overall manufacturing activity rose from 49.4 to 50.7, signaling an increase in activity, with factories also reporting a continuing drop in export orders last month, economists question the numbers.
In many countries, executives report that mandated social distancing make it impossible to fully staff factories and, therefore, to raise production to normal levels.
“Whether growth can achieve any serious momentum remains highly uncertain,” said Chris Williamson, IHS Markit’s chief business economist. “Demands looks… to remain subdued by high unemployment and falling corporate profits for some time to come.”
TRENDPOST: Adding to the bleak economic future, yesterday the World Bank predicted what we have long forecast: we face the worst economic collapse in modern history.
They said the implications of the virus lockdowns have inflicted a “swift and massive shock” not seen since 1870.
Estimating that some 100 million people will be driven into extreme poverty, World Bank Group Vice President, Ceyla Pazarbasioglu said, “This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges.”
