Vaccine hopes set against darkening near-term outlook

The continued surge in COVID-19 infections across the country is prompting a growing number of states to reimpose restrictions on activity. The softer retail sales data in October indicated that this is already starting to weigh on the economy and, with high-frequency indicators of services activity pointing to a continued deterioration, the risks to our forecast that GDP growth will slow to 4.5% annualised in the fourth quarter are increasingly skewed to the downside. Next year is shaping up to be a different story, however, with the prospect of highly effective vaccines becoming widely available within the next six months or so potentially giving a boost to economic growth. Alongside a further fiscal stimulus package, which is still a distinct possibility despite the elections failing to deliver the ‘Blue Wave’ that President-elect Joe Biden would have hoped for, the prospects for the economy further ahead are looking increasingly bright.