In their annual U.S. Economic Outlook released on Thursday, UM economists forecast the real gross domestic product (GDP) in the United States will rise by 4.2 percent in 2021, against an anticipated 3.6-percent drop in 2020, and real GDP may return to pre-pandemic levels in the second half of 2021.
"We expect life to return to close-to-normal by mid-2021, because of a combination of rising prevalence of natural immunity, the expanding availability of vaccines, further developments in COVID-19 management and therapeutics, and the inevitable pandemic fatigue," the report said.
Other key findings and trends cited in the report include: the unemployment rate is expected to fall slowly and steadily from 6.9 percent in October of this year to 5.6 percent by the end of next year and 5.1 percent by the end of 2022; real disposable income is forecast to increase by 5.6 percent in 2020, owing to the massive federal financial stimulus; the 30-year conventional fixed-rate mortgage rate may creep up from 2.8 percent in early 2021 to 3.1 percent by the end of 2022.
The report expects inflation to remain restrained, "outweighed by the large demand shock from pandemic." A core inflation rate that excludes food and energy is expected to remain at 1.8 percent in 2021 and 1.9 percent 2022, equal to the level in 2019 and undershooting the Federal Reserve's 2-percent target.
The report is produced four times per year by the Research Seminar in Quantitative Economics in the UM Department of Economics since 1952.
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