A new survey released on Monday shows that the hit of the surge of Covid-19 caused by the delta variant of the coronavirus in the United States prompted business economists to mark down their estimates and forecasts of growth for the American economy for the current year.
A growth rate for the US economy of 5.6 per cent for 2021 is expected by a panel of 47 economists who were interviewed in the survey that was conducted by the National Association for Business Economists.
Even though growth rate is still strong, it is lower than the forecasts in May when a growth rate of 6.7 per cent for 2021 was expected by business economists. Their forecast for growth in the third quarter for the economy was also sharply cut down by the economists who now expect an annualised growth rate of 4 per cent compared to forecast of 6.6 per cent back in May.
The lowering of predicted growth rate highlights the hit to the economy by the delta variant of the coronavirus which has again slowed down growth in air travel, hotel reservations and reopenings of offices.
On the other hand, economists participating in the survey also expect continuation of price spikes at the end of this year. They expect a 5.1 per cent year on year surge in consumer prices during the fourth quarter, the NABE said. That is significantly higher than the forecast of inflation of 2.8 per cent made by the economists in May. This expected surge also reflects the sticker shock being experienced by Americans in everything from used cars and gasoline to meat.
However the silver lining of the survey is that the business economists also agreed to the analysis of the Federal Reserve about the high rate of rise of consumer prices will be a temporary phenomenon with the economy continuing to adapt to Covid-19. NABE said that business economists expected consumer prices inflation to moderate to 2.4 per cent by the fourth quarter of next year.
Similar changes to forecasts by its economists was made last week by the Fed as it cut down its expected 2021 forecast of economic growth while increasing its expected growth in inflation for the current year.
(Adapted from CNN.com)