US | Resurgent Covid could stymie services’ rebound

The services sector partially snapped back in Q3, but the enduring health crisis will make the road to recovery long and uneven. Even after accounting for an H2 rebound, the damage suffered in H1 means real value-added services output by the end of 2020 will still be 2% below its pre-pandemic level.

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  • We anticipate that a widely available vaccine in mid-2021 will provide the necessary conditions for services growth to rebound 4% next year and fully recoup Covid-19 losses by Q4 2021. However, near-term risks are skewed to the downside, with Covid cases surging, the recovery losing momentum, and imminent fiscal support unlikely.
  • Evidence of a K-shaped services recovery is visible with the information and communication technologies, professional and business services, and financial services industries out-performing. These industries have already recouped their losses or will do so by early 2021. Meanwhile, colder weather in the winter months and lingering virus fear will restrain the leisure and hospitality rebound. The arts, entertainment, and recreation, as well as accommodation and food services industries will take the longest to recover, not recouping their losses until 2024.
  • Double-dip recession risks are rising as the health situation worsens. Findings from our Global Scenarios Service show that US services output would fall through Q1 2021 if the virus’ recent spike forces renewed containment measures, but the decline would be more modest than in spring 2020.

Topics: United States, Coronavirus, US economy, Heavy Industry, Market Highlights, North America, Consumer

Resurgent Covid could stymie services’ rebound Oxford Economics