What's going on?
Turns out America’s economic support package is already going a long way: the OECD raised its forecasts for global economic growth on Tuesday.
What does this mean?
Now that the US has greenlit a $1.9 trillion economic support plan and the vaccine rollout is in full swing across the world, the OECD thinks the global economy will grow 5.6% this year compared to last – up from its 4.2% forecast in November. The spending plan has boosted the OECD’s estimate for the US’s predicted growth too: up from 3.2% to 6.5% – a jump that single-handedly lifts global economic growth by a full percentage point. As for the rest of the world, the OECD’s feeling more positive about the UK, the eurozone, and Japan as well, along with emerging markets Brazil and Mexico. But China, for once, is coming up short: the OECD slightly lowered its growth estimate.
Why should I care?
The bigger picture: America makes the world go round.
For all the talk of China’s rising dominance, the US is still the world’s biggest economy – meaning it has an outsized impact on the rest of the world. Case in point: the OECD estimated that higher US economic growth will add about one percentage point to Canadian economic growth, as well as about half a percentage point to the eurozone’s, the UK’s, Japan’s, and China’s.
For markets: How to spend it: US edition.
According to investment bank Jefferies, Americans who receive $1,400 checks as part of the US economic support plan are likely to spend them on clothing, home improvement, outdoor dining, and travel (tweet this). So once that cash starts landing in people’s accounts, shares of American retailers, restaurants, and airlines could see a boost of their own. Then again, a third of wealthier Bloomberg survey respondents said they’d put their cash into savings, so maybe you’ll want to hold fire on that…