The rapid growth seen by the U.S. economy is about to hit a wall

Workers at the National Parks Authority will exchange the flags of the Washington Monument, which was reopened today, after being closed for six months for COVID-19 safety measures in Washington, USA on July 14, 2021.

Kevin Lemarck | Reuters

The US economy is expected to grow again in the second quarter before the reality begins to sink slowly and steadily.

Gross domestic product is projected to accelerate by 9.2% between April and June, according to a FactSet study.

In the pre-pandemic world, it would have brought annual growth at the fastest level since the second quarter of 1983.But with the current situation Oversized policy support They have produced this for the third consecutive quarter of GDP, well above the post-Recession trend.

But things are changing.

The economy will creep towards normal, public checkbooks from Congress will become increasingly tight, and millions of bystander American workers will return to their jobs. This means a gradual reversion to the average economy accustomed to growing to nearly 2% over the much stronger levels brought about by the reopening.

“Growth is at its peak, with a slight slowdown in the economy later this year and even more pronounced in the first half of 2022 as financial support diminishes,” said Mark Zandi, chief economist at Moody’s Analytics. “. “The outline of growth will be largely shaped by fiscal policy over the next 18 months. The tailwind is not very strong and may stop completely by this time next year.”

It’s been a long way so far, but the economy is very close to its pre-pandemic self.

In fact, according to Jeffreys’ running gauge, the overall output before the Covid-19 turned everything upside down was 98.6% of the “normal” level. The company uses a number of indicators to measure then and now, with retail and housing lagging behind in some areas such as employment and air travel, while retail and housing overall activity is 98.6% of 2019 levels. I found that it was pushing up to just below.

Aneta Markovska, Chief Financial Economist at Jeffreys, said:

surely, Total household net worth is $ 136.9 trillion By the end of the first quarter, it was up 16% from 2019 levels, according to the Federal Reserve Board. At the same time, household debt payments compared to disposable income fell to 8.2%, the lowest ever since 1980.

However, most of its net assets are driven by the increase in financial assets such as stocks, and personal income is Government stimulus payments It slows down and eventually stops.

Demographics that hinder growth

Gasoline prices at the Royal Dutch Shell Plc gas station in San Francisco, California, USA, Wednesday, July 7, 2021.

David Paul Morris | Bloomberg | Getty Images

Inflation, combined with the decline in fiscal support, also serves as a limit to growth.

“The economy is facing supply constraints, where housing investment can be a drag and inventory changes remain negative,” said Alexander Lynn, a U.S. economist at Bank of America. rice field. “In the future, this is probably the peak and growth will cool in the coming quarters.”

Capital Economics forecasts GDP to fall below consensus at 8% in the second quarter, but will drop to 3.5% over the next period.

Paul Ashworth, North American Chief Economist at Capital Economics, said: “Monthly growth continues to slow as rising prices weigh on real income, with a sharp slowdown in third-quarter consumption and GDP growth. It seems to set the stage. “

Pandemic is another wildcard.

The delta variant cases are as follows: Soaring in a handful of states, And health officials are worried that the United States may face waves that will hit some European and Asian countries. While economists rarely expect a blockade or another wave of similar constraints in the United States, foreign pressure can hurt domestic growth.

“Export platforms like Vietnam are currently locked down,” Bruce Ellas said. “Vietnam is becoming a more important gear in the world’s supply chain, and we are watching it carefully.

Bruce Ellas added that negotiations over debt caps could also shake the situation in the United States.Yellen on Friday, special measures U.S. may need to take Continuing to repay debt can run into problems as soon as October.

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The rapid growth seen by the U.S. economy is about to hit a wall

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