US growth has been booming, but it is likely to slow as the boosts from post-covid reopening and fiscal stimulus fade. Strategists at TD Securities discuss their current outlook as well as some key sources of risk and uncertainty.
Fiscal stimulus to fade
“We don't expect the latest COVID-19 wave to have a major growth impact, but there will likely be some fallout. We expect fiscal stimulus to fade to the point of policy turning contractionary on a change basis in FY22, even with another fiscal package. We expect real GDP to slow from a still-very-strong 7% QoQ AR in the current quarter to 4% in Q4 and 2.5% on a Q4/Q4 basis in 2022.!
“Payrolls have lagged GDP, and gains will probably remain strong in coming months. That said, we don't expect the recent pace to be sustained.”
“We expect sharp slowing in inflation as base and reopening effects fade and the surge in used vehicle prices is partly reversed, but YoY readings are likely to remain elevated until the recent MoM data drop out of calculations in 2022.”
“We expect enough ‘substantial further progress’ for Fed officials to announce the start of QE tapering before year-end, but the slowing in growth and inflation in the year ahead is likely to help the case for holding off on tightening (i.e., rate hikes) until well after tapering concludes.”
“We forecast a formal tapering announcement in December 2021, with November also possible, but no rate hike until December 2023.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.