Rising virus case numbers took an increasing toll on the US economy in December, with business activity, order books and employment all growing at much reduced rates. The slowdown was especially steep in the service sector, where stricter social distancing measures hit consumer-facing businesses in particular.
While the survey data remained sufficiently resilient to indicate that GDP continued to expand at a relatively robust rate in the fourth quarter, the near-term outlook has deteriorated. Business expectations for the coming year fell considerably compared to November, as some post-election exuberance waned and companies grew more anxious about the ongoing impact of the pandemic. Rising case numbers represent an increased risk to the economy in the coming weeks, and hopes rest to a large extent on pandemic stimulus lifting the economy to prevent another downturn.
More encouragingly, businesses remain much more confident about the outlook in a year’s time than before the successful vaccine developments, reflecting greater optimism for prospects of life returning to normal in the second half of 2021.
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