JPMorgan Forecasts GDP Contraction In Q1 2021, Rebound Thereafter

In its 2021 US economic outlook, JPMorgan argues that "recent restrictions on activity associated with the latest surge in [COVID] case counts will likely deliver negative growth in 1Q21", at a -1.0% annualized rate for the quarter (following a forecast +2.8% in Q420).

• However they see a bounceback thereafter in part due to recent "favorable news on the vaccine trials", and an anticipated further $1trn in fiscal support ("with the most likely timing on agreement being late 1Q21"). So +4.5% growth in Q2, and +6.5% in Q3.
• However inflation to remain subdued, with lingering labor market slack keeping inflation within a 1.5-2.0% range next year "despite the long-speculated death of the Phillips Curve". Core PCE to hit 2% in mid-2021 for a few months before falling back below target by end-year.
• This will keep the Fed "mostly out of the picture", with no rate hikes at least through end-2022. But notes that they recently changed their call for the Dec 2020 FOMC, now seeing an extension of maturity of purchases.
• And if unemployment looks to be heading below 5% by mid-2022, "this could start discussions late next year of the dreaded T-word: tapering".