U.S. Economy: Losing Steam, But Moving Forward
- Courriel
-
Signet
-
Imprimer
Disponible en anglais seulement
The weaker Q2 GDP result—just 6.5% annualized when 8.5% was expected—and a mix of headwinds has spurred another downward revision to our U.S. economic outlook. We lowered our Q3 growth call to 6.0% (from 7.5%), while keeping Q4 at 5.0%. This carved the 2021 annual rate by half a percentage point to 6.0% and the 2022 pace a few notches to 4.0%. The GDP report showed another massive decline in business inventories, confirming what businesses have been saying all year: supply shortages are preventing them from ramping output to meet pent-up demand. And, demand was hopping in Q2, with consumer spending accelerating 11.8% annualized and business spending staying strong despite continued weakness in commercial construction. The combination of stimulus, reopening and vaccinations continued to overwhelm other hurdles. However, the June personal spending report confirmed that most of the Q2 binge stemmed from March’s high jump-off point, courtesy of a second round of rebate cheques. Spending volumes fell modestly in the May-June period, despite a partial rebound in June.
Besides supply shortages, notably of workers, two other headwinds are clamping down on growth. The first is spiking prices. Even if most of the jump in inflation proves temporary, price levels will be much higher than anyone foresaw at the start of the year, eroding purchasing power unless wages keep up. But, so far, the employment cost index is rising only moderately, 2.8% in the past year to Q2, a full percentage point slower than PCE prices. Does anyone think that used car sales won’t be dented by a 45% jump in prices in the past year? In the housing market, a 17% y/y surge in home values has already taken the steam out of sales.
The second headwind is the Delta variant, which is seeing caseloads rise across the country and even hospitalizations turning up in a number of states, including Florida even though its inoculation rate is only modestly below the national average. While this new wave might not lead to severe restrictions (a few cities have re-imposed mask mandates but not initiated new curbs on activity), it could lead to increased hesitancy to travel, dine out, or pursue indoor entertainment. Receding case counts in the UK and the Netherlands are encouraging, but we still don’t know the course the Delta variant will take.
The toxic mix of supply shortages, demand-sapping price hikes, and virus uncertainty will counter some of the thrust from excess savings, record wealth, and rising employment. At the same time, while the fiscal proposals to rebuild the nation’s infrastructure and social programs are likely to support activity, they will do so in a more incremental fashion than the earlier rescue and stimulus plans. As well, with GDP now regaining its recession losses, there is less room to expand. The days of gangbuster growth are likely behind us. That said, the headwinds will slow, rather than stop, the economy’s forward motion. We still expect growth to average 5.5% in the second half of the year, three-times faster than long-term potential. And 2021 will still mark the economy’s best performance in 37 years.
U.S. Economy: Losing Steam, But Moving Forward
Directeur et économiste principal
Sal Guatieri, économiste et directeur principal à BMO Marchés des capitaux, compte 30 ans d’expérience à titre de macr…
Sal Guatieri, économiste et directeur principal à BMO Marchés des capitaux, compte 30 ans d’expérience à titre de macr…
VOIR LE PROFIL COMPLET- Temps de lecture
- Écouter Arrêter
- Agrandir | Réduire le texte
Disponible en anglais seulement
The weaker Q2 GDP result—just 6.5% annualized when 8.5% was expected—and a mix of headwinds has spurred another downward revision to our U.S. economic outlook. We lowered our Q3 growth call to 6.0% (from 7.5%), while keeping Q4 at 5.0%. This carved the 2021 annual rate by half a percentage point to 6.0% and the 2022 pace a few notches to 4.0%. The GDP report showed another massive decline in business inventories, confirming what businesses have been saying all year: supply shortages are preventing them from ramping output to meet pent-up demand. And, demand was hopping in Q2, with consumer spending accelerating 11.8% annualized and business spending staying strong despite continued weakness in commercial construction. The combination of stimulus, reopening and vaccinations continued to overwhelm other hurdles. However, the June personal spending report confirmed that most of the Q2 binge stemmed from March’s high jump-off point, courtesy of a second round of rebate cheques. Spending volumes fell modestly in the May-June period, despite a partial rebound in June.
Besides supply shortages, notably of workers, two other headwinds are clamping down on growth. The first is spiking prices. Even if most of the jump in inflation proves temporary, price levels will be much higher than anyone foresaw at the start of the year, eroding purchasing power unless wages keep up. But, so far, the employment cost index is rising only moderately, 2.8% in the past year to Q2, a full percentage point slower than PCE prices. Does anyone think that used car sales won’t be dented by a 45% jump in prices in the past year? In the housing market, a 17% y/y surge in home values has already taken the steam out of sales.
The second headwind is the Delta variant, which is seeing caseloads rise across the country and even hospitalizations turning up in a number of states, including Florida even though its inoculation rate is only modestly below the national average. While this new wave might not lead to severe restrictions (a few cities have re-imposed mask mandates but not initiated new curbs on activity), it could lead to increased hesitancy to travel, dine out, or pursue indoor entertainment. Receding case counts in the UK and the Netherlands are encouraging, but we still don’t know the course the Delta variant will take.
The toxic mix of supply shortages, demand-sapping price hikes, and virus uncertainty will counter some of the thrust from excess savings, record wealth, and rising employment. At the same time, while the fiscal proposals to rebuild the nation’s infrastructure and social programs are likely to support activity, they will do so in a more incremental fashion than the earlier rescue and stimulus plans. As well, with GDP now regaining its recession losses, there is less room to expand. The days of gangbuster growth are likely behind us. That said, the headwinds will slow, rather than stop, the economy’s forward motion. We still expect growth to average 5.5% in the second half of the year, three-times faster than long-term potential. And 2021 will still mark the economy’s best performance in 37 years.
Autre contenu intéressant
IN Tune: The AI + Data Center Build Out: Sustainability Impacts, Second Order Beneficiaries
Le partenariat États-Unis-Canada: perspectives économiques en Amérique du Nord
Alimentation, agriculture, engrais et facteurs ESG – thèmes abordés lors de la 19e conférence annuelle sur les marchés agricoles de BMO : recherche sur les actions de BMO
IN Tune: Food, Ag, Fertilizer, and ESG From BMO’s 19th Annual Farm to Market Conference
Budget fédéral de 2024 : Hausse de l’impôt sur les gains en capital; quelques pépites pour les entrepreneurs
Attracting More Generalist Investors in North America to the Oil and Gas Industry
Le sommet inaugural de BMO sur l’obésité est axé sur les thérapies et la lutte contre une épidémie croissante
BMO Blue Book: U.S. Economy is Resilient but Predicted to Slow in Early 2024
The Age of Transparency: Companies Poised to Benefit as Reporting Rules Tighten
Breaking Down the Food Waste Problem: Big Inefficiencies = Big Opportunity
ESG Thoughts of the Week from BMO Equity Research: Wildfire Risk, CAT Losses Increasing
Alimentation, agriculture, engrais et critères ESG lors de la 18e Conférence annuelle sur les marchés agricoles de BMO
Les spécialistes de BMO à notre 18e Conférence annuelle sur les marchés agricoles
BMO Equity Research Hosts Voluntary Carbon Market Discussion at BNEF
North American Outlook: Incertitude : tout, partout et tout à la fois
La transition énergétique nécessitera la collaboration entre les minières et les utilisateurs finaux
Rapport spécial des Études économiques de BMO : Un trio de facteurs préoccupants
Stratégie de placement nord-américaine : perspectives du marché américain 2023
Meilleurs classements pour l'équipe Macrostratégies, Titres à revenu fixe, devises et marchandises de BMO Marchés des capitaux dans un sondage effectué auprès des clients investisseurs institutionnels
Inflation, taux d’intérêt et économie : que nous réserve l’avenir?
Dépenses budgétaires fédérales : une vaguelette plutôt qu’une vague
EXERCICES 2022 ET 2023 : Mettre de l’ordre dans « ses affaires »
The Market Transition from COVID-19 has Begun: Belski to BMO Metals and Mining Conference
Les changements radicaux causés par le variant Omicron et la pandémie – Mise à jour sur la situation sanitaire et la biopharmaceutique
Le variant Omicron – Perspectives sur la santé et les marchés
Des spécialistes de BMO discutent des résultats des élections canadiennes
IN Tune: Food and Ag Takeaways From the Farm to Market Conference
IN Tune: Commodity Pointers From China's Big Policy Meeting
IN Tune: ESG Performance in the Canadian Real Estate Industry
Perspectives des marchés américain et canadien 2021 – Spécialistes de BMO
Premiers résultats des élections américaines : Ce que nous savons
Sonder les profondeurs de la récession imputable à la COVID-19
Données critiques – Des tests, des tests, et encore plus de tests
Precedents can help us understand this unprecedented crisis
Le pic de la pandémie de COVID-19 en vue grâce aux mesures d’atténuation
Discussion avec le chef de la direction de BMO : Comprendre les conséquences de la COVID-19
Les mesures de relance publiques ralentiront la chute, mais n’empêcheront pas la récession
COVID-19: Reshaping the restaurant industry, today and tomorrow
Contenir la propagation de la COVID-19 – Y a-t-il des raisons d’être optimiste?