BlackRock Investment Institute

Macro insights

Powerful restart confirmed

The economic restart in the U.S. is outpacing expectations. The Fed has repeatedly revised its growth estimates for GDP upwards over the past 12 months to considerably higher than original estimates. In its latest projection, GDP is expected to surpass pre-Covid levels this year, rather than taking several years as initially expected. In contrast, growth forecasts were repeatedly revised down after the global financial crisis. This underscores the different nature of the Covid shock: We view it as more akin to a natural disaster than a typical business cycle downturn.

Growth revisions

Chart showing Fed GDP estimates being revised up post-Covid shock

Forward looking estimates may not come to pass. Sources: BlackRock Investment Institute, Federal Reserve, and Reuters News, with data from Haver Analytics, June 2021. The chart shows the level and estimates of U.S. GDP over time for the Covid 19 shock, rebased to 100 for the year prior to the shock 2019. Estimates are from the Fed’s Federal Open Markets Committee’s Summary of Economic Projections published through 2020 21. The level of GDP is derived from the FOMC’s forecasts of GDP growth from the fourth quarter of the prior year to the fourth quarter of the current year. Early estimates are as of June 2020, later estimates as of June 2021.

Yet the upward revisions are becoming smaller as the restart plays out, as shown in the chart. The Fed’s indication last week that rate hikes could potentially come earlier than previously forecast were in response to the inflation outlook -  and not upward revisions to growth, in our view. We believe the Fed will also pay close attention to the labor market, and monitor how quickly the restart translates into broad employment gains

Recent macro insights

The Fed's communication challenge
Federal Reserve officials surprised markets by embracing higher inflation and heralding a lift-off of rates in 2023, rather than 2024.
Powerful restart confirmed
The economic restart in the U.S. is outpacing expectations. The Fed has repeatedly revised its growth estimates for GDP upwards over the past 12 months.
Japan's restart gathers pace
Industrial production has now surpassed pre-Covid levels - ahead of the U.S. and euro area, despite a later restart.
Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Macro Research

Stay ahead of markets with the latest insights from the BlackRock Investment Institute.

Please try again
First Name *
Please enter a valid first name
Last Name *
Please enter a valid last name
Email *
Please enter a valid email
Investor type *
This field is mandatory
Country *
This field is mandatory
Company *
This field is mandatory
Thank you
Thank you for your subscription!
We usually publish weekly insights on every Monday. Expect to receive your first newsletter from us this upcoming Monday.