The U.S. economy could take the better part of a decade to fully recover from the coronavirus pandemic and related shutdowns, a U.S. budget agency said, as a series of surveys pointed to continuing weakness in global manufacturing.
The Congressional Budget Office, a nonpartisan legislative agency, said the sharp contraction triggered by the coronavirus caused it to mark down its 2020-30 forecast for U.S. economic output by a cumulative $7.9 trillion, or 3% of gross domestic product, relative to its January projections. GDP isn’t expected to catch up to the previously forecast level until the fourth quarter of 2029, the CBO added.
The roughly $3.3 trillion in stimulus programs enacted by Congress since March will only “partially mitigate the deterioration in economic conditions,” the CBO said.
The CBO analysis came as new surveys showed that factories in the U.S. and abroad continued to reduce output and shed jobs in May, though the pace of deterioration moderated as governments moved to ease coronavirus-related restrictions on their economies.
The U.S. Institute for Supply Management’s manufacturing index for May rose to 43.1 from an 11-year low of 41.5 in April. The index’s core components all remained well below the 50 level that marks the threshold between contraction and expansion. A majority of survey respondents said both production and new orders worsened in May from April, and two-fifths reported lower employment levels.
The factory indexes add to other signs the U.S. and other countries may have reached an economic bottom, though recoveries could be slow. Unemployment is up sharply across the globe. Services industries, hit particularly hard by the virus, are just starting to recover. And consumer spending, an important catalyst for the U.S. and other economies, remains weak.