The two largest differences between the two forecasts result from the economic effects of the COVID-19 pandemic in reducing output and the legislation enacted between January and early May in response, which partly offsets that reduction.
The revised forecast for nominal GDP reflects a significant markdown in CBO’s projection of real (inflation-adjusted) production in the United States as a result of the pandemic. Business closures and social distancing measures are expected to curtail consumer spending, while the recent drop in energy prices is projected to severely reduce U.S. investment in the energy sector. Recent legislation will, in CBO’s assessment, partially mitigate the deterioration in economic conditions.
CBO’s May projection of real GDP in the second quarter of 2020 was $724 billion (or 13.3 percent) lower in 2019 dollars than the agency’s projection from January. Beyond the second quarter of 2020, the difference between those projections of real GDP shrinks, to $422 billion in 2019 dollars (7.6 percent lower in the more recent projection) by the end of 2020 and roughly disappears by 2030 (see Figure 3). As a result of those differences, CBO projects that over the 11-year horizon, cumulative real output (in 2019 dollars) will be $7.9 trillion, or 3.0 percent of cumulative real GDP, less than what the agency projected in January.
Chosen excerpts by Job Market Monitor. Read the whole story @ Comparison of CBO’s May 2020 Interim Projections of Gross Domestic Product and Its January 2020 Baseline Projections | Congressional Budget Office