The U.S. economy will fall into a double-dip recession and take nearly a year longer to return to pre-pandemic growth if Congress fails to pass a new coronavirus relief bill, according to an economic forecast released by S&P Global on Wednesday.
“Since June, S&P Global Economics has said that it is not a far-fetched possibility that we could get a scenario of no more fiscal stimulus and a COVID-19 resurgence that cripples growth in the fourth quarter,” S&P Global Chief Economist Beth Ann Bovino wrote in her analysis. “Unfortunately, this downside scenario seems more likely.”
She went on to say that a surge in cases and the absence of fiscal stimulus would mean gross domestic product “will decline for two consecutive quarters,” postponing a full recovery until the second half of 2022 and risking “longer-term scarring.”
“On its own, a one quarter decline does not signal recession. But it increases chances that the U.S. will see another downturn in the near future,” the report said.
Two consecutive quarters of economic contraction is considered the standard definition of a recession.
The S&P forecast predicts the economy will shrink at a 2.3 percent annual pace in the last three months of 2020, bringing the total economic decline for the year to 3.9 percent.
Without a roughly $1 trillion relief bill, the outlook would get worse, S&P said, and the economy would stagnate at 0.8 percent growth next year instead of the 4.2 percent otherwise forecast.
The prospects for a stimulus before the end of the year are grim. Senate Majority Leader Mitch McConnell (R-Ky.) is pushing for a $500 billion bill, while Speaker Nancy Pelosi (D-Calif.) is backing a $2.2 trillion measure.
A bipartisan, bicameral group of lawmakers this week introduced a $908 billion measure they hope will serve as a compromise.