New estimates show US economy was in slightly better shape in Q3
Revised figures show the economy grew at a slightly faster pace in Q3, but Omicron is expected to weigh in on Q4.
The United States economy grew at a slightly faster pace in the three months ending September than originally thought, revised government figures released on Wednesday show.
Real gross domestic product (GDP), which measures the nation’s total output of goods and services, increased at a 2.3 percent annualised rate in the third quarter, said the Commerce Department.
While that was a slight improvement over the previous estimate of 2.1 percent, it still marked the slowest pace since the second quarter of 2020, when the US economy suffered an historic contraction as lockdowns ground activity to a halt.
The economy grew at a brisk 6.3 percent annualised rate in the first quarter of this year and 6.7 percent in the second quarter, as COVID-19 restrictions were rolled back. But the spread of the Delta variant of the coronavirus during the summer changed down the recovery in the third quarter.
Wednesday’s stronger read on third-quarter GDP was driven by upward revisions to consumer spending – the engine of the US economy – and business inventories. And some analysts see growth rebounding strongly in the final three months of this year.
“The recovery will end 2021 on a strong note, with strong household finances, rising employment, and an improved health backdrop [before Omicron arrived] supporting GDP growth above 7 percent in Q4,” said Oren Klachkin, lead US economist at Oxford Economics.
But Klatchin and other economists see the emergence of the highly contagious Omicron variant dampening economic prospects for the start of 2022.
Worries over Omicron have sent Wall Street on a rollercoaster ride in recent weeks. The outlook for the US economy also took a knock after moderate Democrat Senator Joe Manchin said over the weekend that he would not back President Joe Biden’s $1.75 trillion domestic investment bill known as Build Back Better.
That led Goldman Sachs on Sunday to trim its GDP growth forecast for the first quarter of 2022 to 2 percent from 3 percent. It also revised downward its forecasts for the second and third quarters of next year.
The economy has stayed on the path of recovery throughout this year, and the US labour market is awash in a near-record number of job openings.
But pandemic disruptions have seen costs soar, with annual consumer price inflation growing at its fastest pace in nearly 40 years last month. The healthy recovery combined with persistent price pressures has prompted the Federal Reserve to start reining in pandemic-era support that helped prop up the American economy.