US 3Q Growth Rate 2.3%... Despite Strong 4Q Outlook, Widespread Expectations of Next Year’s Slump

Compared to the provisional 2.1%, up by 0.2 percentage points
Following Goldman Sachs, Morgan Stanley also lowers next year's GDP growth forecast
Dark clouds due to Omicron and BBB bill failure

[Image source=Reuters Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The U.S. third-quarter economic growth rate stood at 2.3%. Although it was higher than Wall Street expectations, negative views on next year's growth rate are increasing due to the combined impact of the Omicron variant spread and the looming failure of the social infrastructure investment bill.

The U.S. Department of Commerce announced on the 22nd (local time) that the finalized third-quarter Gross Domestic Product (GDP) growth rate was 2.3% on an annualized basis. This was 0.2 percentage points higher than the preliminary figure released at the end of last month but was the lowest growth rate since the sharp decline in the second quarter of 2020 due to the COVID-19 pandemic.

The finalized third-quarter growth rate was only about one-third of the second quarter's 6.7% growth rate.

Weak consumer spending hindered GDP growth. The Personal Consumption Expenditures (PCE) growth rate, which accounts for two-thirds of the U.S. economy, was recorded at 2.3%, the lowest level since the second quarter of last year.

U.S. media evaluated that despite the spread of the Delta variant, supply chain disruptions, and reductions in government aid, the GDP growth rate came out higher than initially expected.

The problem lies in next year. In the fourth quarter, growth is expected to accelerate due to the year-end shopping season effect, with an annual growth rate of 5.6%, but the first quarter of next year is considered uncertain.

There are significant concerns that the spread of new COVID-19 infections caused by the Omicron variant could limit first-quarter growth.

Christopher Rupkey, chief economist at New York FWD Bonds, said, "While fourth-quarter growth will be dazzling as consumers open their wallets, the economic path in 2022 will be more challenging due to the spread of Omicron."

The increased likelihood of failure of the $1.75 trillion social welfare infrastructure investment bill 'Build Back Better' promoted by President Joe Biden is also an obstacle to achieving next year's growth rate.

Investment bank Morgan Stanley lowered its U.S. GDP growth forecast for next year from 4.9% to 4.6% a day earlier, citing uncertainty over the passage of the BBB bill.

Earlier, Goldman Sachs also downgraded its first-quarter GDP growth forecast for next year from 3% to 2% immediately after Senator Joe Manchin's opposition remarks to the BBB bill.