Saturday, October 23, 2021

Delta Darkens US Third-Quarter Growth View, Fed Taper Announcement Expected in November: Poll

BENGALURU – The US economic rebound in Q3 was partly delta over the spread of the coronavirus variant, with economists in a Reuters poll pushing back their hopes in November, when the Federal Reserve announced an imminent policy change.

Like most countries, the US economy is facing disruption in the global supply chain due to the pandemic, which has also driven up inflation.

The change in expectations in the past month for when the Fed would announce a taper to its $120 billion in monthly bond purchases has been almost as sudden as an unexpected dent to the recovery in the current quarter.

For now, most economists say the growth slowdown will be temporary, and has yet to make any major changes to a firmer outlook for next year.

Despite President Joe Biden’s mandate to encourage Americans who haven’t been vaccinated to get a shot, kids are going back to school and some firms continue to plan for return, which still risks further spread. can increase.

“The prospects for growth in the US are rising, and for the first time a sharp decline in our third-quarter growth projections will support that outlook,” said Ellen Gentner, chief US economist at Morgan Stanley. In August left an “ugly mark”.

“The bottom line is that expansion progress continues, albeit at a slow pace,” she said.

A Reuters poll of September 13-16 lowered the average Q3 growth forecast to a seasonally adjusted annual rate of 4.4 percent, well below the 7.0 percent growth from a month earlier and the second quarter’s 6.6 percent, with lower lows and lower highs. was showing.

The Q4 mean was cut from 5.9 percent to 5.1 percent.

Of the 51 economists who answered an additional question in the survey, nearly 85 percent said the spread of the delta variant had a material impact on their quarterly GDP growth forecasts over the past month.

But the growth outlook for next year is still a strong 4.2 percent, unchanged from the August poll, and 2.3 percent in 2023, just a notch lower than last month’s forecast of 2.4 percent.

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Meanwhile, the expected timing of the Fed’s taper announcement has changed decisively over the past month, partly because inflation also remains high.

Nearly three-quarters of the respondents, 36 out of 49, said the taper would be announced in November, and not this month as previously thought.

“If the delta (variant) is going to hurt the economy too much, we may see a delay in the formal announcement from November to December or January,” said Philip Mare, senior US strategist at Rabobank.

While six respondents still expected an announcement at the conclusion of the Fed’s September 21-22 meeting, economic uncertainty due to rising COVID-19 cases and a weak jobs report last month prompted most economists to change their expectations. has prompted.

When asked about the greater exposure to job market forecasts, a modest majority of respondents said there was a downside. The unemployment rate was expected to remain above its pre-pandemic level of 3.5 percent until at least 2023.

More than 60 percent of respondents expected a monthly cut of $10 billion in Treasury purchases and $5 billion in mortgage-backed securities in December. Most economists had expected it to end in the third quarter of 2022.

While the consensus showed that the federal funds rate will remain unchanged at 0.00 percent–0.25 percent until 2023, more than a quarter of respondents, 16 out of 56, said the Fed will raise rates next year for the first time in this cycle.

The core personal consumption expenditure price index—which recorded its biggest increase since 1991 in June—was expected to average above 3.5 percent per quarter for the rest of 2021.

Core PCE inflation was expected to cool slightly but will remain above the central bank’s target of 2.0 per cent until at least 2023.

By Shruti Sarkar and Indradeep Ghosh

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This News Originally From – The Epoch Times

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