The End Is Nigh: Approaching Economic Escape Velocity After COVID

By Jason Schenker

United States and global growth prospects have improved greatly since the start of the year. The rollout of COVID vaccinations has proven to be the logical antidote to the economic woes engendered by the pandemic. Yes, there are still some sectors that lag and some regions experiencing sluggish recoveries. But the labor market, the economy and the outlook for quarters ahead have all improved. It seems as if the escape velocity for the U.S. economy to achieve true economic recovery is quickly approaching. In fact, many sectors that were especially depressed by COVID—like tourism, travel, leisure and services—are experiencing resounding recovery, with a potential boom in the year ahead.

Meanwhile, sectors that barely slowed during the COVID recession—like manufacturing and e-commerce—still have a positive outlook. And they are poised to benefit from improved job growth and relatively low interest rates. Of course, the outlook for material handling remains strong as well. This should not be surprising, because a strong outlook is something the MHI Business Activity Index (BAI) was portending a year ago, when respondents noted record levels of confidence in future new orders. That year passed slowly at times, but here we are now. And the outlook is solid.

While there have been great economic improvements in recent months, inflation and tax policies present risks for the second half of the year and well beyond 2021. Will they be worrisome enough to stall growth? That seems unlikely. But they could dampen some of the economic optimism and financial market upside—as well as the rate of GDP growth—in the quarters ahead.

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