President Biden’s stimulus package won final approval in Congress last week, and it is set to create a positive confidence effect on domestic demand. We are thus revising up our GDP growth projections for the US, to +5.3% y/y in 2021 (from +3.6% expected in December 2020) and +3.8% in 2022 (from +3.1%), after a -3.5% contraction in 2020. We now forecast the unemployment rate to reach 4.3% at 2022-end (vs. 6.2% in February 2021), meaning that households’ excess savings accumulated during the crisis should be released faster than expected. We expect US households’ savings rate to reach 7% of gross disposable income at 2022-end (vs. 20.5% in January 2021). The stimulus will also boost business confidence, supporting non-residential investment. This increase in domestic demand will not be fully absorbed by US producers. We expect the US trade deficit to widen to 4.5% of GDP on average over 2021-2022, compared with 2.9% on average over the past five years. More precisely, we estimate that a +1% increase in domestic demand leads to a +2.6% rise in imports in the US.
President Biden’s super stimulus is thus set to support exporters across the world. By sector, additional gains in exports in 2021-2022 will be the largest in household equipment (+USD32bn), computers & telecom (+USD30bn), automotive manufacturers (+USD30bn) and machinery & equipment (+USD29bn). By region, gains over 2021-2022 will be the largest for Western Europe (+USD97bn), Asia excluding China (+USD75bn), China (+USD60bn) and Latin America (+USD59bn). Given the design of the US stimulus and economic recovery path, we estimate that around three-quarters of the boost in exports will be felt in 2021 (and around one-quarter in 2022).
In absolute terms, exporters in China, Mexico and Canada will benefit by far the most. The boost to China’s exports to the US (+USD60bn in total over 2021-2022) is likely to focus on computers & telecom, household equipment and textiles. Additional export gains in Mexico (+USD45bn in total) will be comparatively more important in the automotive sector. In Europe, exporters in Germany are best positioned to profit from the US stimulus (+USD22bn in 2021-2022), followed by the United Kingdom (+USD16bn), Ireland (+USD13bn) and France (+USD10bn). In Germany, exporters in the machinery & equipment, automotive and pharmaceuticals sectors are particularly exposed.
In relative terms, the boost to GDP in 2021 will be the largest for Mexico, Vietnam, Ireland, Canada and Malaysia. Additional gains in exports of goods and services over 2021 and 2022 thanks to the US super stimulus amount to 1.7% of 2021-2022 GDPs in Mexico, 1.4% in Vietnam and 1.3% in Ireland. In Vietnam, exporters of textiles and computers & telecom in particular will take advantage of the US stimulus, while pharmaceuticals, chemicals and services in Ireland and electronics in Malaysia will gain relatively more.