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Hangover Arrives For US Economy
As expected, the US economic expansion faltered in the third quarter, data out Thursday showed.
The world's largest economy grew at a 2% annual rate in Q3 (figure below), down markedly from Q2's 6.7% pace.
The headline print was well short of consensus. Economists expected 2.6%, but the downside surprise likely wasn't large enough to materially alter the macro narrative, which already centered around the assumption that growth peaked over the summer.
The range of estimates, from nearly six-
I think we need to re-write the axiom attributed to Einstein, this is the new definition of insanity:
“More broadly, the problem is that the “slowdown” phase is colliding with a coordinated tightening effort across developed market central banks. That effort is aimed at combatting the knock-on effects of cost-push inflation, which may not respond to rate hikes (let alone expectations thereof) unless and until tighter policy leads to demand destruction via recession or, at the least, an even sharper slowdown than the one we’re witnessing now.”
Tightening into a slow down? SMH
What is the course of the virus in the next 6 months? If you can answer that, you could take a good guess at the path of the recovery. We will get a continued recovery. The question is how fast and what is it going to look like? There is a pretty low likelihood of a recession much before 2024-25. That does not mean that happy days are here again……though
UK may be a good preview for the US. Similar society, similar retreat from Covid restrictions, earlier and more complete vaccination effort albeit with inferior vaccine. Their Delta surge presaged the US surge, and they are now seeing a Delta+AY surge. Deaths are still low, but cases are climbing.
In US, peak Delta came on schedule and now the Delta surge is fading away. Since vaccination rate is mediocre, momentum on vaccination program has largely stalled, and FDA/CDC are slow-walking boosters, I expect the next US surge sometime this winter (a few months from now?).
Thinking a smaller surge than Delta surge, deaths relatively lower but case count and medical system burden still significant, with an impact on consumer behavior. Notice that the leisure, hospitality, travel stocks have lost momentum; I don’t think that is all from input cost inflation.
In general, most countries are shifting to a “live with endemic Covid” strategy, sometimes due to vaccine avaliability and sometimes for economic/political reasons. China is the obvious exception.
If there are no significant Covid restrictions, even a very high vaccination rate (>80%) cannot prevent a Delta surge – Singapore is proving this right now. Therefore, I think many countries will see at least one more surge in the next several months.
Chart shows UK US Singapore https://91-divoc.com/pages/covid-visualization/?chart=countries-normalized&highlight=United%20Kingdom&show=highlight-only&y=both&scale=linear&data=cases-daily-7&data-source=jhu&xaxis=right&extra=United%20States%2CSingapore#countries-normalized
Well put. On Oct 21 I saw the results of Deloitte poll which indicated that 11.5% of US holiday shoppers say they plan not to spend anything on gifts and services this year. Up from 4.9% in 2020 and 2.9% in 2019. Two thirds of them make less than $50,000. That fits with the survey that Dr. H recently posted where 30% of lower income people say that they lost all of their savings during the pandemic.
They forecast a 7-9% growth in holiday sales this year, thanks to wealthier consumers spending more. They forecast that spending by lower-income Americans will fall 22% y-o-y.
It is starting to look as if the notion of a K-shaped recovery is being confirmed.
Street analysts are mainly in the lucky group and so they base their forecasts on what they see in their world. Maybe that is sensible – their audience mostly are part of the same income cohort.