Daily Management Review

Analysts: The US economy is slowing down


The US economy slowed down sharply in the third quarter. Had the economy grown at the same rate all year round, the figure would have been just 2% - down from 6.7% in the second quarter and 6.3% in the first. On a normal annualised basis, growth was 4.9% - down from 12.2% in April-June and 0.5% in January-March. Compared to pre-pandemic levels, US GDP increased by 1.4%.

Noah Wulf
Noah Wulf
The growth rate of consumption slowed down to 1.6% from 12% at the end of the second quarter (consumption of durable goods, including cars, fell by 26.2% due to supply problems). Capex grew by 1.8% q-o-q compared to 9.2% q-o-q. A 2.5% fall in exports with a 6.1% rise in imports led to a negative contribution of net exports to GDP growth of minus 1.1 percentage points. Real income fell by 5.6% year on year (this was due to the discontinuation of the crisis benefits).

A slowdown in GDP growth in the third quarter was inevitable. Recruitment in the USA fell sharply against the background of a new wave of the coronavirus. At the same time, unemployment fell from 5.9% to 4.8%. This came as a surprise to the market so that the Fed is moving closer to a decision to roll back its quantitative easing programme.

Capital Economics believes that a reduction in the negative impact of chip shortages and the fall in new COVID-19 infections will lead to higher growth in the fourth quarter, although it could also be only about 3%. ING Bank sees weak growth as a temporary phenomenon and expects that the improving labour market situation will support income levels, and with the expected increase in government spending (on infrastructure and social spending) and the opening of borders next year, growth in the US economy could reach 4.5%. The bank also expects that despite weak growth, at the upcoming Fed meeting on 2-3 November it will be announced that it will start winding down its asset purchase programme, allowing it to end completely by June next year.

source: capitaleconomics.com