Economic recoveries are improving around the world, but the global rebound remains massively uneven, the Organization for Economic Co-operation and Development said in a new report.
The OECD revised its estimate for global gross domestic product higher on Monday, citing unprecedented policy support and the effectiveness of COVID-19 vaccines. Output is now expected to grow 5.8% in 2021, up from the December 2020 forecast of a 4.2% expansion. That rate would mark the strongest year of economic growth since 1973 and follow last year’s 3.5% contraction, the OECD said.
Global GDP will then grow 4.4% in 2022, according to the report. Global income will still sit roughly $3 trillion below its pre-crisis trend by the end of next year as emerging countries struggle to keep up.
“The global economy remains below its pre-pandemic growth path and in too many OECD countries living standards by the end of 2022 will not be back to the level expected before the pandemic,” Laurence Boone, chief economist at OECD, said.
Living conditions aren’t the only disparity expected to widen through the recovery. Real GDP is expected to grow 6.3% and 4.7% among G20 nations in 2021 and 2022, respectively. That outpaces the average growth estimate.
Meanwhile, some emerging-market economies are expected to post substandard growth in the near term. Countries still enduring deadly waves of COVID-19 such as India and Brazil “may continue to have large shortfalls in GDP relative to pre-pandemic expectations” and only bounce back once the virus threat fades, the organization said.
Improving vaccine distribution is key to supporting such countries, especially as virus uncertainties linger. New variants of COVID-19 could necessitate a return to partial lockdowns if populations aren’t vaccinated quickly enough, the organization warned. Such a resurgence could also drag consumer confidence lower and halt any rebound in spending.
Upside risks have emerged as well. Household saving boomed through the pandemic, and that cash could soon be unleashed as people unwind pent-up demand. Spending just a fraction of the bolstered savings “would raise GDP growth significantly,” the OECD said.
But with spending comes inflation. Supply-chain disruptions and bottlenecks around the world have driven material prices higher in recent months. When coupled with a sharp bounce in demand and various stages of reopening, price growth now sits at its highest levels in more than a decade. The OECD expects inflation to average 2.7% in 2021 before cooling to 2.4% next year.
Central banks should allow for a brief inflation overshoot as production normalizes and temporary pressures ease, Boone wrote. Running economies hot can allow for stronger hiring and wage growth, particularly among low-income groups. Central banks must “remain vigilant” and look through temporary inflation, the economist said.
“What is of most concern, in our view, is the risk that financial markets fail to look through temporary price increases and relative price adjustments, pushing market interest rates and volatility higher,” Boone added.
The Bank of England sharply upgraded its forecasts for the UK economy on Thursday, citing the successful rollout of coronavirus vaccines and a sharp drop in COVID cases.
Policymakers at the Bank kept interest rates at the record-low level of 0.1% and maintained the size of its bond-buying package, through which the BoE injects money into the economy, at £895 billion ($1.25 trillion).
The BoE predicted UK gross domestic product will grow 7.25% in 2021, considerably higher than its February estimate of 5% growth. UK GDP contracted 9.8% in 2020, the worst slump out of the G7 countries.
The Bank said the unemployment rate should now peak at just under 5.5% in the third quarter of 2021, down sharply from an earlier estimate of a 7.75% peak. And it said UK GDP should recover its pre-pandemic level towards the end of 2021, earlier than previously expected.
“New COVID cases in the United Kingdom have continued to fall, the vaccination programme is proceeding apace, and restrictions on economic activity are easing,” the bank said in its monetary policy statement.
The central bank’s monetary policy committee (MPC) said that while the overall size of its quantitative easing (QE) program would remain the same, the weekly pace of its purchases would slow somewhat.
Thomas Pugh, UK economist at consultancy Capital Economics, said this move was not due to the strength of the economy. “The MPC has always said that it aimed to finish the £150 billion of QE announced last November ‘around the end of 2021’, so the pace of asset purchases was always going to slow at some point,” he said.
The UK has achieved one of the fastest vaccine rollouts in the world, with 51% of the population having received at least one dose by May 4, according to Our World In Data. That compared to 63% in Israel and 44% in the US.
Business and consumer confidence has picked up, as coronavirus cases have fallen following strict lockdowns in January and February and the government has gradually reopened the economy.
On the topic of inflation, which has unnerved financial markets in recent months, the Bank said it expected a short-term spike followed by a fall. It said year-on-year inflation is expected to rise above the Bank’s 2% target towards the end of 2021 before returning to around 2% in the medium term.
By at least one popular measure, the US economy will fully recover and exceed its pre-pandemic strength in the second quarter.
US gross domestic product is expected to grow at an annualized rate of 10.4% through the quarter that ends in June, according to the Federal Reserve Bank of Atlanta’s GDPNow model. Growth at that pace would place economic output at a new record high, surpassing the peak seen during the fourth quarter of 2019. It would also be the second-strongest rate of growth since 1978, exceeded only by the record-breaking expansion seen through the third quarter of 2020.
The central bank’s nowcast is a type of projection that is updated as new economic data is published. GDPNow isn’t an official forecast from the Atlanta Fed, and is instead used to narrow down where quarterly growth is likely to land. The model also ignores the pandemic’s impact beyond its influence on source data such as retail sales and global trade, according to the Fed.
The first GDPNow reading for the second quarter was published on Friday, just one day after the Commerce Department published its initial estimate of first-quarter growth. US GDP expanded at an annualized rate of 6.4% in the first three months of the year, missing the median estimate of 6.7% but still showing a sharp acceleration from the prior period. The jump was primarily fueled by widespread vaccination, gradual reopening, and stimulus passed by former President Donald Trump and President Joe Biden.
Though some individual indicators have already surpassed their pre-pandemic levels and signal a strong recovery, GDP remains just below its previous peak. Following the first-quarter reading, GDP has retraced about 96% of its pandemic-era decline. With data tracking consumer spending and hiring trending higher as the economy reopens further, the US is largely expected to complete its GDP recovery in the next two months.
Economists outside the Fed also see growth accelerating through the current quarter. The consensus estimate from a survey of forecasters calls for annualized growth of just under 9% in the second quarter. The most bullish estimates see GDP expanding at a rate of more than 11%, while the least optimistic expect growth to land at about 6%.
The estimates underscore the fact that, should vaccination continue and case counts decline further, the US is on track for its strongest rate of annual growth in decades. The International Monetary Fund estimates GDP will grow 6.4% through all of 2021, exceeding global growth of about 6% and marking the fastest rate of expansion since the early 1980s. Separately, Federal Reserve officials hold a median estimate of 6.5% growth this year.
America is getting ready for its post-pandemic glow-up.
Peak sweatpant has passed and high heels are hot again, in the ultimate symbol of an economy ready to let loose. Americans are booking beauty services, buying going-out clothes again, and readying for a “hot vax summer” as they emerge from lockdown looking and feeling different than they entered, helping the economy roar back to life in the process.
It’s the result of vaccination rates revving up, big cities reopening, and Americans sitting on a ton of cash. Between three stimulus checks and the decline in discretionary spending that accompanied a pandemic shutdown, Americans were holding $2.6 trillion in excess savings as of mid-April, per Moody’s Analytics.
But to power such an economic transformation, Americans need to keep spending.
BofA’s head of North America Economics, Ethan Harris, wrote in March that the US’ economic fate will depend on whether Americans view their excess savings as wealth or deferred income. His team sees the savings being treated as the latter, which should “help support exceptional growth this year in addition to the tailwinds from fiscal stimulus and an improving virus picture.”
Mark Zandi, chief economist at Moody’s Analytics, agrees. “An unleashing of significant pent-up demand and overflowing excess saving will drive a surge in consumer spending across the globe as countries approach herd immunity and open up,” he wrote in a note. He sees 20% of excess savings being spent in 2021, and another 20% next year.
Credit card spending is already up, but it’s just the beginning. Inflation, unequal savings distribution, and an uneven economic recovery may prove to be challenges in spending enough to fuel an economic boom.
Spending on outdoor activities and a ‘hot vax summer’
“The snooze is over,” wrote BofA’s Michelle Meyer, head of US economics, in a note published on Thursday. BofA’s card spending showed a massive uptick in consumer spending for the week, up 45% year-over-year and by 20% over two years previous.
The third stimulus has already impacted Americans’ bank accounts, per Bureau of Economic Analysis data. As incomes climbed by 21.1% last March – a record monthly income leap dating since 1946 – consumer spending rose with it, increasing by 4.2%. Americans haven’t spent that much since June. Total consumer spending, not adjusted for inflation, has now exceeded pre-pandemic levels.
In consumer spending, still leading the way is solitary leisure– solo activities that Americans turned to in the social-distancing era as previous forms of leisure, especially hospitality and entertainment, fell off dramatically. Spending on sporting goods such as golf, campground, and bike equipment, is continuing its momentum with activity above pre-pandemic norms, per BofA.
But we’re also starting to see a resurgence in the activities of pre-pandemic yore. Spending on transit, restaurants and bars, department stores, and clothing have all increased by over 100% on a daily basis over the past 10 days, per BofA.
The post-pandemic beauty boom has also arrived, as The Atlantic’s Amanda Mull reported. From eyebrow threading and hairstyling to mani-pedis and cosmetic injections, she wrote, people are booking up beauty services for their own personal glow-up. Beauty sales increased by 31% for for the week ending April 24, per BofA, compared to 2019.
The start of this spending is already making a difference. GDP grew at a 6.4% annualized rate in the first quarter, the Commerce Department estimated on a preliminary basis.
While Americans have already begun swiping their cards, there are still holes in the economy to fill and challenges to overcome.
Entertainment and airline spending are improving, but still weak, per BofA. More Americans intend to travel as the weeks go by, with some already booking vacation rentals and hotels, and airlines just saw their busiest weekend since pre-pandemic, but travel’s comeback is a gradual one.
That might partly be because the economic recovery across America hasn’t been uniform. BofA spending analysis finds the South and parts of Midwest are faring better economically than the West and the Northeast. That’s likely because the latter regions had longer lockdowns and a slower easing of restrictions in an attempt to curb the spread of the coronavirus.
Also unequal is the share of savings built up during the pandemic. Zandi said in the Moody’s note that this would limit an even bigger boom in spending. “Much of the excess saving has been by high-income, high-net-worth households who are likely to treat the saving more like wealth than income, and will thus spend much of less it, at least quickly,” he wrote.
Nearly two-thirds of the excess savings in the US is by households in the top 10% of the income distribution, per Moody’s data, and three-quarters is by those in the richest 20%.
Consumer spending accounts for 70% of the American economy, and half of that is from the top 10% of American households, per estimates from Goldman Sachs and Deutsche Bank, respectively. That means about one-third of US GDP comes from spending by the top 10%. In other words, the US needs spending from wealthy households the most.
But there’s a side effect that may come with unleashing pent-up demand: inflation. While experts don’t think the economy will overheat like it did in the 1970s, some goods and services have begun to get more expensive amid the supply shortages that have come with reopening. The unpredictability of inflation could cause consumers to curb their spending.
A world with baggy jeans and remote work
In a post-pandemic world, though, America will look a little different. The point of a glow-up, after all, is transformation.
Urban areas too, will look a little different. While experts and the data are pointing to big cities like New York making a comeback, they will likely function in new ways. Urban theorist Richard Florida previously told Insider he thinks major cities will be reshaped and revived by a newfound focus on interpersonal interaction that facilitates creativity and spontaneity. He said the community or neighborhood itself will take on more of the functions of an office.
The work-from-home revolution could bolster new cities’ real-estate markets, as more broadly shared prosperity counteracts decades of increasing regional inequality, but spending within cities themselves could suffer. For instance, economists estimate spending in downtown areas will be 10% depressed – or more in the case of Manhattan – because of the remote-working revolution. So the fashions on the street will look different, and the cities will probably be a bit emptier.
People are also buying more stuff for inside the home. Spending in home categories was up 50.3% over 2019 for the week ending April 24, according to BofA. Americans have learned to spend in a more private way during a year inside. The glow-up is on, but Americans will have to keep spending for a truly impressive makeover.
China’s economy grew a massive 18.3% in the first 3 months of the year, the strongest ever quarterly year-on-year growth figures for the world’s second-biggest economy.
But that number doesn’t tell the whole story. When looked at quarter over quarter, China’s economic growth slowed to 0.6% in the first quarter from an upwardly revised 3.2% in the final 3 months of 2020, the country’s National Bureau of Statistics said.
Analysts cautioned that the 18.3% figure was flattered by what’s known as base effect, a problem that will be plaguing economic data over the coming months.
As headline gross domestic product and many other key economic figures are typically measured year on year, abnormally low figures a year ago will make the most recent growth seem huge.
That’s exactly what happened here. China’s economy shrank sharply in the first quarter of 2020 as coronavirus started to spread and shut down parts of the country. Compared to then, China’s first-quarter growth in 2021 was enormous.
The headline figure “tells us little about the economy’s current momentum,” Julian Evans-Pritchard, senior China economist at consultancy Capital Economics, said. The record growth was “entirely due to a weaker base for comparison from last year’s historic downturn,” he said.
“In quarter-on-quarter terms, growth dropped back sharply and, with the exception of Q1 last year, was slower than at any other time during the past decade.”
Despite this quarterly slowdown in growth, China’s economy has recovered rapidly from the pandemic. Its gross domestic product regained its pre-coronavirus size by the end of September, and it was the only major economy to expand in 2020.
Analysts have cautioned a range of economic data is about to be skewed by this base effect. Inflation has become a point of concern, given the sensitivity of markets and central banks to the figures.
Eleanor Creagh, Australian market strategist at Saxo Bank, said in a note in March that there is “a raft of data ready to kick off the ‘base-effect cliff’ into the heart of the crisis last year.”
She cautioned that “these incredibly favourable base effects will render a huge year over year acceleration in the data due March, April, May.”
The MSCI Index’s broadest gauge of global stocks edged up 0.05% in early European trade, just slightly lower than Thursday’s record peak.
Futures on the Dow Jones, S&P 500, and Nasdaq whipsawed between gains and losses, suggesting a mixed open when US indices start trading later in the day.
US jobless claims for the week through April 10 fell to 576,000, beating economist expectations of 700,000. That is the lowest unemployment figure since claims soared at the start of the pandemic.
Outperformance of technology stocks led the Nasdaq to gain 1.31% on Thursday, taking it to within half a percent of its record close. Yield on the 10-year Treasury fell 11 basis points on Thursday, before bouncing back to 1.58%.
Key figures released by Chain’s statistics bureau pointed to a continued rebound, but they are perhaps unusually strong in comparison with last year, when the economy contracted in response to the pandemic.
UBS said while investing at all-time highs may be daunting for some, it expects more upside ahead and predicts the S&P 500 could end the year at 4,400, roughly 5% higher than where it is right now.
“As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “We maintain a cyclical bias and prefer US consumer discretionary, energy, financials and industrials. We also retain our preference for value versus growth, as well as for small- and mid-caps over large-caps.”
Elsewhere in Europe, the head of Germany’s disease control agency said people need to drastically reduce contact to curb a third wave of coronavirus infections. Cases in the country were up by 31,117 on Thursday – the most since mid-January.
London-based research company Airfinity announced 1 billion doses of COVID-19 vaccines have been made so far. It forecasts the world could produce another billion doses in the next month alone as production ramps up.
London’s FTSE 100 rose 0.4%, the Euro Stoxx 50 rose 0.3%, and Frankfurt’s DAX ignored the health crisis in Germany and rose 0.5%.
Asian markets traded higher on the back of strong Chinese data.
“With the recovery happening as expected, the market anticipates that monetary policy will be normalized, and liquid margins tightened,” said Lynda Zhou, a portfolio manager at Fidelity International. “Overall, market sentiment remains fragile as it tends to react slowly to positive news and quickly to negative news.”
Elon Musk asked Cathie Wood this week what she thought about Warren Buffett’s favorite market indicator flashing red recently. The star stock-pickerreplied that the gauge is likely inaccurate, and argued the heady valuations of certain technology stocks are justified.
“What do you think of the unusually high ratio of S&P market cap to GDP?” the Tesla chief asked the Ark Invest boss. He was referring to a version of the Buffett indicator, which takes the combined market capitalization of a country’s publicly traded stocks and divides it by the latest quarterly GDP figure available.
The S&P 500 represents about 78% of the total market cap of US stocks, as measured by the Wilshire 5000 Total Market Index. The S&P 500’s combined market cap has surged past $33 trillion this year – more than 150% of the latest estimate for fourth-quarter US GDP of $21.5 trillion.
Wood replied to Musk’s question by suggesting that GDP understates economic growth because it doesn’t fully account for increased productivity. Technological innovations today are “dwarfing” those in previous eras, driving down prices and fueling demand, she continued.
The Ark founder also drew a line between the dot-com bubble and the current hype around tech stocks.
“Back then, investors chased the dream before the tech was ready and while costs were too high,” she said. “After gestating for 20-30 years, the dream has turned into reality.”
Moreover, Wood predicted that companies that have failed to innovate and instead have borrowed money to fund stock buybacks and dividends “will pay a steep price.” She expects them to be forced to cut prices to shift inventory and make debt repayments.
In short, Wood’s view is that the disconnect between the S&P 500’s market capitalization and national GDP isn’t worrying because GDP is a flawed measure, unprecedented innovation justifies higher company valuations, and technological advances are cutting costs so inflation won’t be a problem either.
Her stance clashes with Buffett’s praise of his namesake gauge as “probably the best single measure of where valuations stand at any given moment” in a Fortune article in 2001. When the indicator peaked during the dot-com boom, it should have been a “very strong warning signal” of an upcoming crash, the Berkshire Hathaway CEO wrote.
Musk might have to wait a few more months to find out which investor is right.
The International Monetary Fund will lift its projections for global economic growth in the wake of encouraging vaccination trends and major new stimulus in the US, Managing Director Kristalina Georgieva said Tuesday.
The IMF will roll out an upgraded set of forecasts for this year and for 2022 next week when it publishes its World Economic Outlook report, she said. The organization’s January estimates saw global output growing 5.5% in 2021 after a forecasted tumble of 3.5% the previous year. The months since have seen COVID-19 cases fall from their peaks, vaccine rollouts begin, and $1.9 trillion in new fiscal support from the Biden administration.
The developments all stand to boost global economic recoveries through the summer, Georgieva said in prepared remarks.
“This allows for an upward revision to our global forecast for this year and for 2022,” she said.
Without “extraordinary effort” from essential workers and scientists, the global recession seen through most of 2020 would have been “at least three times worse,” the managing director added.
The news isn’t all good. Georgieva highlighted that, despite the broadly improved outlook, the global recovery remains uneven and gaps between countries could widen in the coming months. The US and China are likely to reach pre-pandemic levels of gross domestic product by the end of the year, but “they are the exception, not the rule,” she said.
New virus strains in Europe and Latin America are fueling high uncertainty about the region’s prospects. Emerging and developing countries also endured a 20% drop in per-capita income, roughly twice that seen in advanced economies. The plunge leaves emerging countries with a much harder climb back to pre-crisis health.
“They already have more limited fiscal firepower to fight the crisis. And many are highly exposed to hard-hit sectors, such as tourism,” Georgieva said
One upgrade among many
The IMF joins a handful of other institutions turning more bullish toward the US and global rebounds. Fitch lifted its own forecast for global expansion on March 18 to 6.1% from 5.3%, similarly citing stimulus and progress toward reopening. The estimate implies the strongest year of global growth since at least 1980.
US growth will outperform slightly at 6.2%, Fitch said. That’s up from the previous estimate of 4.5%.
“It still looks reasonable to assume that the health crisis will ease by midyear, allowing social contact to start to recover. But immunization delays or problems remain the key risk,” the firm said.
Wall Street giants have also boosted their estimates in recent weeks. Morgan Stanley is among the most bullish, lifting its US growth estimate to 8.1% in 2021 from 7.6% in an early March note. The forecast also calls for US GDP to reach pre-pandemic levels by the end of the first quarter.
Bank of America raised its 2021 US growth estimate to 7% from 6.5% on Thursday, marking its fourth upgrade this year alone. The revision was entirely linked to Democrats’ new stimulus measure and the “exceptional consumer spending” seen among those receiving relief checks, the team led by Michelle Meyer wrote.
The American reopening is already leading to stronger growth than banks expected. Just ask Bank of America.
On Thursday, BofA economists lifted their 2021 US growth forecast once again on hopes for past and future stimulus accelerating the economic recovery. The upgrade is at least the fourth the bank has made this year.
The team led by Michelle Meyer now expects gross domestic product to grow 7% this year, up from the previous estimate of 6.5%. Output will then reach 5.5% the following year, also an upgrade.
Growth on a fourth-quarter-by-fourth-quarter basis will total 7.7% in 2021 and 4.4% in 2022, the team added. That exceeds the Federal Reserve’s median estimates of 6.2% and 3.4% growth in 2021 and 2022, respectively.
The upward revision is entirely linked to stimulus. The $1.9 trillion measure passed by Democrats earlier this month is already fueling “exceptional consumer spending” according to credit- and debit-card spending data tracked by the bank. Distribution of $1,400 direct payments contributed to a 40% month-over-month spending leap among recipients. The boost might only just be getting started, the economists said in a note to clients.
Total card spending was up a whopping 45% from a year ago and 23% from two years ago for the seven days ending March 20, per BofA data.
“We think consumer spending is about to take off given the one-two punch of stimulus and reopening,” they added.
Hopes for a follow-up spending package added to the bank’s rosier forecast. The White House is organizing a proposal for up to $3 trillion in spending on infrastructure, climate, and education projects to further aid the country’s rebound. Such a plan would drive a more moderate boost to growth over a longer period of time, the bank said.
Tax hikes used to pay for a follow-up spending package could offset some gains, the team added.
Stronger 2021 growth should open the door for a swifter labor market recovery, according to the bank. The team expects a series of encouraging jobs reports starting with the March release scheduled for April 2. Payroll growth is projected to average 950,000 per month in the second quarter and pull the unemployment rate to 4.7% from 6.1%.
The rate will fall more modestly through the rest of the year to 4.5%, the team said. That matches the Fed’s own year-end estimate.
Bank of America’s bullish update follows similarly optimistic forecasts from Wall Street peers. Recent weeks have seen Morgan Stanley, UBS, and Goldman Sachs all lift their own estimates for 2021 GDP growth.
Morgan Stanley remains the most bullish of the bunch, estimating the economy will expand 8.1% this year and return to pre-pandemic output levels by the end of the first quarter. All three banks, along with Bank of America, hold decidedly more hopeful outlooks than the Fed due to expectations for another large-scale spending measure.
Another massive tranche of fiscal stimulus is on the brink of passage, and UBS sees the measure fueling strong growth well into next year.
Economists led by Seth Carpenter expect US gross domestic product to grow 7.9% from the fourth quarter of 2020 to the fourth quarter of 2021. Growth on a calendar-year basis will total 6.6%, a larger-than-usual difference due to depressed first-quarter gains.
The economy will continue to expand at a robust pace in 2022 as a new fiscal support measure further boosts the recovery, the team projected.
The bank’s previous baseline scenario assumed Republican opposition would force President Joe Biden to shrink his $1.9 trillion stimulus plan, but that hasn’t taken place. With House Democrats poised to approve the measure in a final vote on Wednesday, the bill is set to lift the last pockets of the economy still struggling through lockdowns.
“The manufacturing sector is robust. The housing sector is surging. The part of the economy that is lagging is consumer spending on services,” the team said in a Tuesday note. Their updated forecast sees spending more evenly spread between goods and services.
Nearly all signs point to a healthy recovery in the coming months. The average rate of vaccination has stabilized above 2 million shots per day, according to Bloomberg data. At the same time, daily case counts are down significantly from their January peak and hospitalizations have similarly plummeted.
The pace of the rebound has raised questions as to whether Biden’s massive relief plan is necessary. Where Democrats claim the hole in the economy is large enough to warrant nearly $2 trillion in fresh aid, critics argue the proposal will overheat the economy and send inflation soaring.
UBS sees little risk of a lengthy inflation overshoot. April and May will likely see price growth sharply accelerate, but that rally will quickly give way to moderately higher inflation in line with the Federal Reserve’s target. The roughly 10 million jobs still lost to the pandemic are proof that there’s room for stronger-than-usual inflation, the bank said.
“We see sustained growth, well in excess of the long-run sustainable pace, but we also see a substantial amount of labor market slack,” the team added.
The outlook matches that outlined in recent weeks by Fed Chair Jerome Powell. The central bank expects reopening to lift prices at a fairly quick rate, but the decades-long trend of relatively weak inflation won’t “change on a dime,” Powell said in a late-February House hearing.
The Fed’s preferred inflation gauge will only trend at its 2% target by the end of 2023, UBS said. Rate hikes likely won’t arrive until 2024, though tapering of the central bank’s asset purchases could arrive as soon as October if the recovery surprises to the upside, the economists added.