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BOS sees peak US growth coming in 2021 with inflation unlikely to be an issue

Ng Qi Siang
Ng Qi Siang5/10/2021 03:24 PM GMT+08  • 3 min read
BOS sees peak US growth coming in 2021 with inflation unlikely to be an issue
Inflation is not seen to be a problem as economic recovery sets in.
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There was both good news and bad news from Bank of Singapore (BOS) head of investment strategy Eli Lee as he predicted US peak quarterly growth to arrive some time in 2021. The downside is that given “what goes up must come down”. Growth is likely to wane in the latter part of the year and into 2022.

Incoming economic data corroborates with Lee’s 6.8% growth projection for the US economy. Manufacturing in the US also seems to be recovering, with the US recording an ISM manufacturing Purchasing Managers Index (PMI) of 64.7 - a multi-decade record. This has since eased to 60.7 in April.

Unfortunately, reality is seen to quickly set in, as net fiscal impulse - or the measure of how government spending influences the economy in the short-run - is seen to fall in 2022-2023 on a relative basis. Despite around US$4.1 trillion ($5.4 trillion) in fiscal stimulus offered by the Biden administration, corresponding tax hikes and 8-10 year timeline is likely to blunt its impact.

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