There have been downward revisions to growth forecasts for Q3 this year and possibly beyond (don’t forget economic forecasts can be and often are wrong!). It’s argued that rising cases of the Delta variant means many people are either unable to work (nearly 6 million in the USA) or have had their hours reduced. This insufficient labour force, coupled with a shrunken supply chain, is believed by some to be capping current growth and causing price rises in both manufacturing and services inputs and outputs.
A more positive outlook is that growth could prevail on the back of the vaccine programme success and the rollout of booster vaccines. Some forecasters believe central bank tapering (slowing the pace of quantitative easing) could take a back seat for now, with interest rates staying low – which is generally good for markets – and bond yields rising steadily with inflation.
The Week That Was…
In Australia, GDP grew 0.7% in Q2 with strong household and government spending more than making up for a drop in export volumes.