Predictions for the new year typically come before the new year, but 2020 is anything but typical. Realtor.com has released an updated 2020 Housing Market Predictions report with COVID-19 updates, and the results look a lot different than the ones they published in December. Before, the report forecasted housing starts to increase by 6 percent. Now, the real estate company estimates a 11 percent drop. As the housing market shows signs of recovery, the reminder that 2020 is still an uphill battle hits where it already hurts. See Realtor.com’s other predictions for fiscal and monetary policy, housing trends, and effects on the presidential election.
For the purposes of measurement, economic activity is divided into private spending and investment, government spending, and net exports. As the coronavirus spread, companies and individuals curtailed travel airlines, cruise ships, hotels, and tourism destinations saw revenue evaporate. Later, as individuals were encouraged or in many cases ordered to shelter at home, a variety of outlets from restaurants and other service industries to consumer goods saw sales decline. Spending on big ticket items such as cars and furniture was particularly dramatically reduced. The economic impacts of these events are far-reaching. Lower consumer demand means inventories build up and there is less need for ongoing production, so manufacturing slows. Reduced travel and manufacturing means less demand for fuel. While government spending has increased as policy makers attempt to offset some of the drop in consumer activity, it has been smaller than what was lost, so economic activity declines.
Stemming from the global trade connections, the pandemic’s impact on trade was swift and strong. With shipments from China and other trading partners stuck in ports, U.S. imports—a negative contributor to GDP—declined by double-digits, while exports declined by a smaller amount, leading to an increase in the trade deficit.
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