The Omicron variant has supercharged the seasonal wave of virus cases sweeping parts of the US, adding to the existing headwinds to consumption growth over the coming months. In contrast to governments in Europe, however, there are still few signs of state or local governments moving to reimpose meaningful restrictions on activity and any voluntary pull-back in activity has, for now, been modest. We had already expected that, with real incomes falling and confidence slumping as the earlier fiscal support fades and surging prices take their toll, real consumption growth would slow over the coming months. The rapidly deteriorating virus situation, and the prospect of at least a temporary disruption in child tax credit payments, only add to the downside risks.
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