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News April 06, 2021

IMF: US Economy to Grow 6.4%

The upgraded forecast, along with other positive economic data on jobs, manufacturing and services, bodes well for promo.

By  Christopher Ruvo

The International Monetary Fund now says that the United States’ economy will grow 6.4% in 2021 compared to 2020 – the fastest annual growth rate since 1984 and likely good news for the promotional products industry.

The IMF, a Washington, D.C.-based financial institution that works to foster global monetary cooperation, secure financial stability and more, upgraded the predicted increase from a previous forecast of 5.1% growth on Tuesday, April 6.

Gita Gopinath

Gita Gopinath, chief economist, IMF

President Joe Biden’s recently passed $1.9 trillion economic/COVID relief package and a quickening rollout of coronavirus vaccinations that’s allowing for a wider-spread societal reopening were key factors fueling the improved outlook, said IMF, which also believes U.S. gross domestic product will grow 3.5% in 2022.

“A way out of this health and economic crisis is increasingly visible,” IMF chief economist Gita Gopinath said at a press conference.

The IMF’s forecast comes amid a recent flurry of other positive economic data.

On Friday, April 2, the U.S. Labor Department reported that nonfarm payrolls soared by 916,000 in March, beating economists’ expectations by about 240,000 jobs. The U.S. unemployment rate dropped to 6% amid the hiring surge.

In another development, the Institute for Supply Management (ISM) reported on April 1 that its index of national factory activity increased nearly four percentage points month over month to 64.7 in March – the highest level since December 1983. Readings above 50 indicate expansion in the manufacturing sector, which accounts for nearly 12% of the U.S. economy.

Meanwhile, a measure of U.S. services industry activity leapt to a record high in March. ISM reported that its non-manufacturing activity index hit 63.7 last month, the highest level in the survey’s history. Again, readings over 50 mean expansion.

“Vigorous services activity in March sets the stage for robust expansion in the second quarter,” Oren Klachkin, lead U.S. economist at Oxford Economics in New York, told Reuters. “All the right pieces for a faster services recovery – expanded vaccine eligibility, reopenings and historic fiscal expansion – are falling into place.”

The promotional products industry tends to trend in the direction of the general economy. As the economy does better, so does the industry. Robust economic growth could, then, help promo distributors regain some of the revenue that COVID eroded in 2020, a year in which distributor sales declined, on average, by nearly 20%.