The output gap output growth analysis framework has a theoretical basis and strong effectiveness. The output gap focuses on the medium term, which is a slow variable, and the output growth focuses on the short term, which is a fast variable. They have different meanings for macro-economy and asset prices.
Under the impact of the epidemic, the output growth rate and output gap of the United States decreased rapidly in the first and second quarters of 2020, and gradually recovered in the third quarter. After the second quarter of 2021, the momentum of U.S. economic expansion has weakened, but the economic growth rate is still higher than the potential economic growth, and the negative output gap continues to narrow. At the same time, the interest rate corresponding to the output growth rate decreased, while the stock price corresponding to the output gap continued to rise. With the recession of the economic stimulus policy, the momentum of U.S. economic expansion will further slow down in 2022, but it is expected that the economic growth will be higher than the potential economic growth at least in the first half of 2022. It may be in the second half of 2022 or later. The U.S. economic growth is lower than the potential economic growth, the output gap decreases, and the economy enters the recession stage.
With the completion of the reduction of bond purchase, the suppression of bond purchase on term premium disappears, and the expectation of monetary tightening is strengthened, the long-term interest rate may still have room to rise, but it should not return to the level before the epidemic, because the long-term natural interest rate is declining. Then, US bond interest rates will decline with the economic recession. At this time, the output gap also began to decline, and the adjustment pressure on US stocks increased. Of course, if the United States continues to implement fiscal stimulus and slow down the pace of monetary tightening, the economic cycle may be prolonged, the decline of output gap will be delayed, and the window period of asset price adjustment in the United States will also be delayed.
In the first quarter of 2020, China's output growth rate and output gap decreased rapidly, began to rise in the second quarter, basically eliminated the negative output gap in the third quarter, and continued to rise and reach a high point in the fourth quarter. As the output growth rate begins to decline in 2021 and is lower than the potential output growth rate, the output gap begins to decline. Interest rates and stock prices (not just stock price growth) began to decline. In the third quarter of 2021, the output growth rate decreased significantly, and the output gap also turned negative.
The output growth rate after the quarterly adjustment in the fourth quarter of 2021 may pick up, but the output gap continues to decline because it is still lower than the potential output growth rate. The output growth rate and output gap may rise in 2022. As the economy enters the upward cycle, the policy may be tightened again in 2022, coupled with the weakening of external demand. In 2022 or later, the economy may go down again. The latter economy is in the shape of Λ. The upward turning point is basically confirmed, but the specific time of turning down again needs to be observed.
China's economy has entered a rising stage again, and monetary policy may be marginally tightened or not as loose as expected, leading to the rise of long-term interest rates. The output gap widened again, the enterprise roe also rebounded again, the stock market probably rose, and the cyclical stocks performed better than the growth stocks. Then, as the stimulus policy subsides and foreign demand weakens, the economy may decline again, driving the growth rate of long-term interest rates and stock prices down. In addition, the difference from 2021 is that the consumption gap in 2022 will continue to narrow compared with 2021, the profits of consumer enterprises will accelerate to improve, and the consumer sector may perform better.
Risk warning: the epidemic situation exceeded expectations; The implementation of the policy was not as expected
