The economy tanked last year. What will happen this year?

This year’s growth will depend on how quickly the vaccines contain the virus, the size of the next stimulus and when the economy fully re-opens.

Recently released data from the US Department of Commerce indicates that GDP declined by 3.5% last year. That is the worst annual economic performance since 1946. All of the decline, however, was in March and April. Because the economy almost completely shut down in those months, the robust V-shaped recovery that followed was not enough to avoid the negative number for all of 2020.

In January and February the economy was very strong. In fact, based on those two months, it looked like GDP growth would be the best in decades perhaps approaching a 4% rate. This annual rate has not been seen since the year 2000.

Then the virus hit. The impact of the economic shutdown was so great in March, that the entire first quarter saw a 5% decline in GDP. The economy continued the shutdown in April. Even though May and June saw a rapid recovery, the April decline was so great that GDP declined at an annual rate of 31% for the second quarter.

Mostly because Congress passed a massive nearly $3 trillion stimulus package and because much of the economy re-opened, third-quarter GDP grew at a 33% annual rate. The V-shaped recovery looked very strong…