Upturn – Bottlenecks – Inflation | Global economy in Covid cycle 8/02/2022
United States: Upswing loses momentum Economic development After taking a hard hit from the Covid crisis in 2020, the U.S. economy seemed to be recovering at the start of 2021. In the first two quarters of the year, GDP increased by an annualised rate of 6.3 and 6.7 percent respectively. According to preliminary estimates by the Bureau of Economic Analysis (BEA), growth in the third quarter then dropped down to an annualised growth rate of 2.3 percent. This is a result of Covid cases increasing again, bringing new restrictions and prompting some companies to postpone openings. At the same time, government aid to companies and private households decreased (BEA 2021a). In May 2021, the OECD had predicted growth rates of 6.9 percent for the year 2021 but in December 2021 it revised its forecast down to 5.6 percent. Forecasts for 2022 and 2023 are 3.7 percent and 2.4 percent respectively (OECD 2021). For 2021, the International Monetary Fund (IMF) and the European Commission are also expecting strong growth of six and 5.8 percent respectively. For 2022, the IMF also forecasts robust growth of 4 percent, while the European Commission’s forecast is at 4.5 percent (IMF 2021, European Commission 2021). We expect real growth of 3.75 percent. The unemployment figures in the United States underline the dramatic impact the Covid pandemic has had on the U.S. economy. While in February 2020, unemployment was at 3.5 percent, by April it had shot up to 14.8 percent. Although unemployment has still not decreased to pre-crisis levels, it had gone down to 4.2 percent by November 2021 (Bureau of Labor Statistics 2021a). The unemployment rate among several minority groups and young people is well above the average level (Bureau of Labor Statistics 2021b). OECD predicts that the unemployment rate will continue to fall to 3.8 percent in 2022 and to 3.4 percent in 2023, which would be even lower than pre-pandemic levels (OECD 2021). Following a clear drop in sentiment among U.S. consumers in 2020, it improved tangibly, climbing up to over 120 points by the middle of September according to the consumer sentiment barometer, the U.S. Consumer Confidence Survey. During the year, the index dropped again, standing at 115.8 points in December 2021 slightly below its highest level in that year. Compared to the previous month, sentiment nonetheless improved slightly (111.9 points) (The Conference Board 2021). U.S. consumer spending also increased steadily, with an increase of 0.6 percent recorded in November compared to the previous month. In October 2021, the upturn in sentiment was even clearer with a plus of 1.4 percent compared to the previous month. The disposable income of private households rose by just 0.4 percent in both October and November after losing 1.3 percent in September (figures month on month in each case (BEA 2021b)). Prices and inflation have been increasing considerably in the United States since spring 2021. According to the Bureau of Labor Statistics, the Consumer Price Index rose by almost 6.9 percent in November 2021 compared to November 2020. This is the largest 12-month increase recorded since June 1982. Steep increases in commodity prices are particularly responsible for the strong upward pressure on inflation. In November 2021, prices for gasoline were up by 58.1 percent and prices for fuel oil by 59.3 percent year on year (Bureau of Labor Statistics 2021c). Government debt In view of the size and number of fiscal measures taken, it is not surprising that the budget deficit of the United States has increased. In July 2021, the Congressional Budget Office (CBO) published a revised estimate of public finances for the fiscal year 2021. According to this report, U.S. debt will
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