US GDP Set to Rise 5.6% Annually to 2025 from 2020 Pandemic-Induced Recession

2/16/2022

Cleveland, OH, February 16, 2022 — US nominal GDP is forecast to grow 5.6% per year through 2025, according to Macroeconomy: United States, a report recently released by Freedonia Focus Reports. Through 2025, real GDP is projected to rise 3.2% yearly. The rapid growth rates are due to a low 2020 base year caused by an economic recession due to the COVID-19 pandemic. In response, the US federal government poured about $5 trillion of stimulus into the US economy in 2020 and 2021 – this stimulus is expected to support increases in personal consumption expenditures (PCE) and fixed investment. However, rapid economic growth in 2021 is generating labor cost increases and congested supply chains, which will slow faster growth. Total nominal PCE spending is projected to expand 5.6% annually to 2025; in real terms, growth is forecast to register 3.4% yearly gains. GDP, employment, and wage growth will boost disposable personal income (DPI) – the key driver of consumer spending.

Nonresidential fixed investment is projected to rise 5.0% per year to 2025. As US economic activity recovers from the COVID-19 pandemic, spending on capital goods and equipment will rebound. Growth in revenues will support spending on new commercial, manufacturing, and institutional facilities. Widespread prevalence of employees working from home will be a mixed bag of drivers and constraints, curbing spending on new office space over the forecast period but supporting sales of new information processing equipment.

Federal spending is projected to rise 2.4% annually to 2025, and state and local expenditures are forecast to grow 3.1% yearly. In real terms, state and local expenditures are expected to rise 0.7% annually, and federal spending will increase slightly. Government spending will expand alongside economic activity and tax revenues. Furthermore, the passage of the Infrastructure Investment and Jobs Act in November 2021 by the US government will spur investments in roads; rail and bus transport; electric vehicles and vehicle chargers; broadband access in rural areas; and upgrades of facilities such as ports, airports, and waterways.

These and other key insights are featured in Macroeconomy: United States. This report forecasts to 2021 and 2025 US gross domestic product in nominal and real (inflation-adjusted) US dollars. Nominal and real GDP are segmented by component in terms of:

  • PCE on services
  • PCE on nondurable goods
  • PCE on durable goods
  • nonresidential fixed investment
  • residential fixed investment
  • state and local government spending
  • federal government spending
  • change in private inventories
  • net exports

Nominal GDP is also segmented by US region as follows:

  • South
    • South Atlantic
    • West South Central
    • East South Central
  • West
    • Pacific
    • Mountain
  • Northeast
    • Middle Atlantic
    • New England
  • Midwest
    • East North Central
    • West North Central

This report also forecasts US retail sales to 2021 and 2025 in nominal US dollars. Retail sales are segmented by business type as follows:

  • nondurable goods
    • general merchandise
    • food and beverage stores
    • gasoline service stations
    • apparel and accessory stores
    • eating and drinking places
    • health care and drug stores
    • other nondurables
  • durable goods
    • general hardware
    • vehicle dealers
    • furniture and furnishings
    • electronics and appliances
    • other durable goods

To illustrate historical trends, GDP, retail sales, disposable personal income, interest rates, labor force size, and the various segments thereof are provided in annual series from 2010 to 2020.

GDP is the broadest measure of macroeconomic activity and is defined as the sum of PCE, investment, government spending, and net exports. The Freedonia Group’s Consensus Forecasts for GDP and other major macroeconomic indicators draw on the projections of 10 to 30 sources.

More information about the report is available at:

https://www.freedoniafocusreports.com/Macroeconomy-United-States-FF95051/?progid=91541