Delta variant adds to consumption headwinds

Although 60% of American adults are now fully vaccinated, the uptick in coronavirus infections linked to the Delta variant has been accompanied by a slight rebound in fears over the spread of the virus. While most states appear unlikely to reimpose restrictions on activity, the upturn in infections still poses a downside risk to the economy over the coming months if it prompts people to voluntarily stay away from in-person services. This comes at a time when real consumption growth already appears to be faltering, as higher prices reduce purchasing power. Despite the solid rise in retail sales in June, the 0.9% rise in prices suggests that will translate to a small fall in real consumption for the second month running. The upshot is that real economic growth is slowing more sharply than we had originally anticipated, even before the potential impact of the new Delta variant.
Paul Ashworth Chief North America Economist
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US Data Response

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More from Paul Ashworth

US Economic Outlook

A whiff of stagflation

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13 July 2021

US Economics Weekly

Economic growth outlook not quite as rosy now

The drop back in Treasury yields has accelerated over the past few weeks, as persistent supply shortages and the spread of new coronavirus variants have raised doubts about the pace of real economic growth in the second half of this year and beyond. We share those concerns and, in our upcoming US Economic Outlook that will be released early next week, we intend to revise down our forecast for GDP growth this year to a below-consensus 6.0%. Nevertheless, we still expect long-term Treasury yields to rebound a little in the second half of this year. (See here.)

9 July 2021

US Economics Weekly

Fed officials split; Biden backs infrastructure deal

Fed Chair Jerome Powell stuck to the script in his congressional appearance earlier this week, arguing it was “very, very, unlikely” that the US would experience a return to the high inflation of the 1970s. Elsewhere, President Joe Biden gave his support to a bipartisan infrastructure deal worth $1trn then promptly threatened to veto it too.

25 June 2021
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