The U.S. economy will sharply reduce its turnover in the third quarter – in recent weeks, Goldman Sachs, Morgan Stanley, Oxford Economics, and the Atlanta Fed have sharply lowered their forecasts for the country’s GDP growth. The fallout from the rapid spread of the COVID Delta strain is not the only reason for the decline.
It is clear to many on Wall Street that U.S. economic growth may slow, but recent forecasts have shown that this will happen faster and more robust than many might have expected.
In recent weeks, these reputable institutions have lowered their forecasts for U.S. GDP (Gross Domestic Product) for the third quarter of 2021:
- Goldman Sachs lowered its forecast from 5.25% to 3.5%;
- Morgan Stanley lowered its estimate from 6.5% to 2.9%;
- Oxford Economics revised its forecast from 6.5% to 2.7%;
New forecast Atlanta Fed calls for growth of 3.7% for the quarter, up an earlier expectation of 5.3% at the beginning of the month.
In the first quarter, US GDP grew by 6.3%, in the second quarter by 6.5%. At the same time, according to government data, Americans’ savings amounted to $ 1.97 trillion in the second quarter. Up from $ 4.07 trillion. In the first quarter.
The U.S. economy today faces three vital negative factors at once:
1. The Covid-19 Delta strain is what lies on the surface. Some restaurants in the U.S. have already begun to close, and consumer demand for tourism and offline entertainment is declining.
2. High inflation – rising prices hinders the growth of the critical engine of the American economy – consumer spending.
At the same time, Thomas Simons, an economist at Jefferies, draws a direct parallel between Delta and inflation, as fears of a new wave of morbidity prevent the solution of the ongoing problem of supply shortages and fuel price increases.
3. Termination of direct government payments, rental assistance, additional allowances for unemployment benefits, etc.
Since last year, the U.S. Census Bureau has been collecting data from Americans extensively, polling consumers about everything, including employment status, childcare conditions, and various household spending, all while reflecting the reality.
In a survey, 41% of American families said they used some form of government assistance to pay for their daily needs during the pandemic.
Given that the United States has curtailed programs for additional unemployment benefits, some childcare benefits, rental assistance, and direct payments to the population can state that the financial income of a significant part of the country’s population has decreased.
Economists at Goldman Sachs recently cut their forecast for U.S. consumer spending in the third quarter to -0.5% year-on-year, after rising 2.8% in the second quarter.
What can you expect?
The optimistic outlook is that the lack of fiscal incentives will lead to more hiring of workers as schools have reopened, and some of the eviction moratoriums have expired.
A less optimistic outcome is that concerns about Delta will outweigh the hiring boom.
Some legislators are pushing for a fourth round of “incentive checks” for populations in challenging economic conditions. The Biden administration’s new budget package also includes expanding unique benefits for children, which some critics say prevents some low-wage workers from returning.
To sum it all up, the experts may be right about one thing: the growth outlook does not look good, and the growth of the U.S. economy may even be slightly worse than current cut forecasts suggest.
