Economists predict that the crises affecting the United States will persist into next year — casting a foreboding shadow on economic growth prospects.
Earlier this month, The Wall Street Journal polled economists on high inflation, constrained supply chains, labor shortages, and other bottlenecks presenting a threat to continued recovery from COVID-19 and the lockdown-induced recession. Overall, the phenomena caused respondents to cut their economic growth predictions in half since their July predictions:
Economists slashed growth forecasts this year, to an average 3.1% annualized in the third quarter from 7% in the July survey. They also lowered projected fourth-quarter growth to 4.8% from 5.4%.
“Consumer spending, and by extension GDP growth, is being limited by high rates of inflation eroding the real purchasing power of consumers,” Visa economist Michael Brown told the outlet.
Indeed, economists also hiked their inflation forecasts:
Consumer-price inflation will drop to 3.4% by June of next year, then 2.6% by the end of 2022, according to respondents’ average estimates. That is still above the average 1.8% that prevailed in the decade before the pandemic.
Most respondents, however, pointed to the supply chain crisis and labor shortages as the primary factors limiting growth:
Concerns about limited supply are the main cloud over the outlook. Around half of respondents cited supply-chain bottlenecks as the biggest threat to growth in the next 12 to 18 months, while nearly one-fifth pointed to labor shortages. They also expect supply-chain woes to weigh on the economy through much of next year. Some 45% estimate that it will take until the second half of 2022 for bottlenecks to have mostly receded, compared with two-fifths expecting major improvement before then.
Beyond the survey, other economists worry that the combined effect of the calamities is sending the United States back into a recession.
Earlier this month, David Blanchflower of Dartmouth College and Alex Bryson of University College London released a paper entitled “The Economics of Walking About and Predicting US Downturns.” Recalling analysts’ failure to predict the 2008 recession, the professors argued that the “wisdom of crowds” held by non-expert consumers is a reliable predictor of recessions.
Rapid downturns in major consumer sentiment surveys — especially those from the Conference Board and the University of Michigan — have successfully forecasted recessions for the past four decades. Blanchflower and Bryson note that such metrics have seen double-digit declines in the last six months, suggesting that the United States economy may now be retracting.
The Daily Wire is one of America’s fastest-growing conservative media companies and counter-cultural outlets for news, opinion, and entertainment. Get inside access to The Daily Wire by becoming a member.
Source: Dailywire
