U.S. Economy Loses Its Bounce as Recovery Turns Into a Grind
Another from sonofseawolf, it looks like the US economy isn't holding out so well:
Just a few months ago, the U.S. economy looked like it was
roaring back from the pandemic slump. Now the recovery is starting to look more
like a grind.
The spread of the delta variant has held back millions of
Americans from spending on services like restaurants and hotel rooms.
Supply chains are still creaking and Hurricane Ida, which
caused havoc in petrochemicals hub Louisiana as well as roughly $20 billion of
flooding damage in the Northeast, may have made them worse. And high inflation
is stretching household budgets.
The Atlanta Federal Reserve’s real-time estimate of economic
activity now predicts growth of 1.2% in the quarter that ended in September.
Two months ago it was forecasting 6%.
Estimated 3Q 2021 pace of growth has tumbled to just 1.2%©
Bloomberg Estimated 3Q 2021 pace of growth has tumbled to just 1.2%
Economists surveyed by Bloomberg are more upbeat. Still, the
consensus growth forecast for the third quarter has dropped sharply since
August.
None of this means the U.S. rebound is heading into reverse,
says Nathan Sheets, newly appointed chief economist for Citigroup Inc. “I think
recession’s too strong,” he says. “But it’s certainly softer.”
Here are five indicators that illustrate and explain the
gathering gloom.
Delivery Delays
Many forecasters use the Purchasing Managers’ Index –- based
on a survey of supply-chain managers -- to gauge the state of manufacturing,
which feeds into their growth estimates. One of its five components is supplier
delivery times, and longer waits are typically seen as a sign of robust demand
and a strong economy.
Long Delays
But in pandemic conditions, that may not tell the whole
story. There have been unprecedented problems with shipping goods to the U.S.,
and transporting them once they’re here. In other words, the long waits may be
as much a sign of supply weakness as strength in demand –- and confusing those
two things may have led economists to be too optimistic about growth.
Missing Jobs
Economy watchers have also been flummoxed by the labor
market. There are more than 10 million open positions – but the pace at which
they’re being filled has slowed sharply. In the past two months, virtually
every economist surveyed by Bloomberg over-estimated the number of new jobs.
In the Clouds
The lowest-paid Americans are bearing the brunt of the
slowdown. Among workers in the lowest quartile of earners, employment was down
by 25.6% compared with pre-Covid levels as of mid-August, according to
Harvard’s Opportunity Insights project. That’s the worst number since June
2020, a few months after the pandemic started.
Inflation Bites
Inflation is throwing a wrench into the recovery too. The
debate over whether pandemic price surges are transitory has yet to be settled
– but they’re reaching ever-deeper into the economy, and crimping the spending
power of households. Mark Zandi of Moody’s Analytics estimates the typical
household has to pay $175 a month extra.
Energy and commodity costs are spiraling higher. Buying
conditions for homes, vehicles and durable goods all deteriorated in August due
to high prices, according to the University of Michigan’s latest consumer
report. Auto purchases fell from an 18.5 million annual pace in April to just
12.2 million last month.
The first wave of pandemic inflation was confined to a
relatively small group of goods and services. That’s no longer the case,
according to the Cleveland Fed.
Price Shifts
Its researchers found that in recent months, roughly
three-quarters of the 44 main components of price baskets were growing at a
pace above 3%. That compares with less than one-third of them at the start of
this year.
Services Lag
The pandemic upended American spending habits. Households
are buying more goods than ever before -- a splurge that’s contributing to the
strains on supply chains. But economists say a balanced recovery will require
more spending on services too, and that’s happening more slowly.
Persistent Gap
Restaurants are one example. The spread of delta in the
summer months halted the revival of dining out, which has settled at levels
below what was normal before Covid hit.
Gloom Feeds Gloom
Business leaders and the general public are turning downbeat
about the economy –- and those expectations can be self-fulfilling, if they
mean that companies invest less and households are more cautious about
spending.
Sentiment Fades
The Michigan consumer survey found that only 44% of
Americans expect their financial situation to improve, the lowest reading in
seven years.
Sentiment among small-business owners deteriorated in
September, with the number who expect better business conditions over the next
six months falling to the lowest since December 2012. A CEO confidence measure
compiled by Chief Executive magazine has also declined for three straight
months –- to a level that means all of the gains earlier in 2021 are now gone.
(Update with latest Atlanta Fed data)
Comments
Post a Comment