(Washington) The US economy grew at a pace of 2.3% in the third quarter, slightly better than expected, the US Department of Commerce said on Wednesday. But the prospects of a strong rebound for the next few months are clouded by the rapid spread of the latest variant of the coronavirus.
The third and final look at the performance of the gross domestic product – or the country’s total production of goods and services – was higher than last month’s estimate, which showed growth of 2.1%.
This improvement is mainly due to higher consumer spending and business restocking than initially estimated.
The 2.3% gain in the third quarter follows explosive growth in the first half of the year as the country emerged from the pandemic, at least economically. Growth was 6.3% in the first quarter and 6.7% in the second quarter. The emergence of the Delta variant over the summer was responsible for much of the slowdown in the third trimester.
Now, with the emergence of the Omicron variant adding to high inflation and lingering supply chain issues, there are fears that growth may be limited by 2022.
Those fears have sent the stock market into a turbulent course in recent days, although new optimism based on the possibility that Omicron will be more manageable pushed the Dow Jones industrial average up 560 points on Tuesday.
All major US markets rallied this week, but all are in negative territory for the past 30 days.
Economists say it is far too early to accurately assess the threats posed by the new variant.
“History is repeating itself with the sudden reappearance of the COVID virus and the weakening outlook for economic growth,” observed Sung Won Sohn, professor of economics and business at Loyola Marymount University in Los Angeles.
Downward revised forecasts
Oxford Economics has reduced its forecast for economic growth for the current quarter from 7.8% to 7.3%, which would still represent a significant rebound from the slowdown in the third quarter.
After Democratic Senator Joe Manchin expressed opposition to his party’s spending plans, Goldman Sachs cut its GDP forecast to 2.0% from 3.0% for the first quarter, 3.0% from 3.0%, 5% for the second quarter and 2.75% against 3.0% in the third quarter.
Kathy Bostjancic, chief financial economist in the United States for Oxford, pointed out that the company’s current assessment was that the resurgence of COVID-19 could reduce growth next year from 4.3% to 4, 1%. Furthermore, if President Biden’s “Build Back Better” program were to be completely derailed, it could likely shave an additional 0.4 percentage point from 2022 growth, bringing it down to around 3.7% and cutting it by half. -point the growth of 2023, bringing it down to less than 2.0%.
She noted that under these assumptions, job growth could be 750,000 lower around the same time next year if economic growth slows as much as it fears.
“Omicron has been so intrusive,” said Mme Bostjancic. “We think this will have a fairly significant impact on economic activity. ”
And the resurgence of COVID isn’t the only thing that could dampen the economy next year. Inflation hit its highest level in nearly four decades, prompting the United States Federal Reserve to start pulling back the massive support it has provided to the economy as it passes from trying from stimulating employment growth to the fight against rising consumer prices.
Economists expect GDP growth this year to reach around 5.5%. It would be the best performance since 1984, and it would represent a reversal from last year, when the economy contracted 3.4% and the global pandemic shed 22 million jobs in the country. beginning of the year.
Wednesday’s report showed that consumer spending, which accounts for two-thirds of economic activity in the United States, grew at a rate of 2% in the third quarter, down from the 12% increase in the April to June quarter, but up from last month’s estimate, which showed a quarterly gain of 1.7%.
Yet it is the uncertainty of the future that now preoccupies economists.
“The Omicron variant presents a short-term downside risk, as do supply chain disruptions and shortages, which could be a strain on households and businesses in the coming months,” said Rubeela Farooqi, Chief Economist for the United States at High Frequency Economics.