Braking Down The News

Red-Hot U.S. Economy Expected to Cool From Here

Growth likely hit a high point in the second quarter and will slow as the boosts from fiscal stimulus and reopenings fade, economists say

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The U.S. economy’s 2021 growth surge likely peaked in the spring, but a strong expansion is expected to continue into next year, say economists surveyed by The Wall Street Journal.

Widespread business reopenings, rising vaccination rates and a big infusion of government pandemic aid this spring helped propel rapid gains in consumer spending—the economy’s main driver. But that burst of economic growth is starting to slow, economists say.

“We’ve moved into the more moderate phase of expansion,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. “We’re past the peak for growth, but that doesn’t mean something more sinister is going on here and that we’re poised to then drop off sharply.”

Rather, economists expect the economy to continue growing solidly over the coming year, fueled by job gains, pent-up savings and continued fiscal support. In the longer term, they foresee the expansion gradually cooling down to a more stable post-pandemic pace.

Economists surveyed this month by the Journal, on average, estimated that the economy expanded at a 9.1% seasonally adjusted annual rate in the April-to-June period. That would mark the second-fastest pace since 1983, exceeded only by last summer’s rapid rebound, when businesses started to reopen after lockdowns and governments began easing pandemic-related restrictions.

 

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