US economy would grow at a slower pace in 2022

Some economists expect the United States to grow more slowly next year after a key Democratic lawmaker dealt a seemingly fatal blow to President Joe Biden’s $ 1.75 trillion spending plan.

Goldman Sachs lowered its 2022 growth forecast, as did Mark Zandi, chief economist at Moody’s Analytics, after Sen. Joe Manchin said Sunday that he does not support the Build Back Better (BBB) ​​proposal that aims to expand the network. social security and tackling climate change.

Goldman Sachs lowered the US GDP expansion forecast for the first quarter of 2022 to 2% from 3%; to 3% from 3.5% for the second quarter, and to 2.75% from 3% for the third quarter.

Manchin told Fox News that after five and a half months of cross-party talks, he could not “vote to continue this legislation. I just can not. I have tried everything humanly possible. I can not”.

“In light of Manchin’s comments, we are adjusting our forecast to eliminate the assumption that BBB will become law,” Jan Hatzius, an analyst at Goldman Sachs, said in a note to investors.

Although the formal vote on the plan has not yet been carried out before the plenary session, legislator Manchin made his position known through the media. His vote was decisive.

“We had already incorporated a negative fiscal aspect for 2022 … and without the approval of the BBB, this scenario will be even more pessimistic than we expected,” said Hatzius.

“While the bill in its current form seems unlikely, there is still a good chance that Congress will enact a much smaller set of tax proposals,” he added.

Ómicron risk keeps pushing

For his part, Mark Zandi, chief economist at Moody’s, said through his Twitter account that “if the BBB does not become law, the economic recovery will be prone to stagnation if we suffer another serious wave of the pandemic, one scenario each. more likely with Ómicron spreading rapidly. “

He added that he expects real GDP growth to be less than half a percentage point in 2022 without the law.

The Gross Domestic Product (GDP) of the United States grew 2.1% in the third quarter of 2021, 6.7% in the second quarter and 6.3% in the first, according to the Department of Commerce.

The Conference Board of the United States forecasts that the United States economy will grow 6.5% at an annualized rate in the fourth quarter of 2021 and expects 5.6% in the annualized comparison.

Survey of specialists reflects pessimism

Specialists recently polled by Reuters expect U.S. GDP to slow early next year from the rapid pace seen in late 2021, even before the Omicron variant of the coronavirus emerged as a threat to global growth and before Biden’s spending plan will fall apart.

According to a survey released on December 8, analysts expected the annualized rate of GDP growth to fall to 4% in the first quarter of 2022.

Additionally, respondents considered growth for all of 2022 to slow to 3.9 percent.

Goldman also said that the apparent demise of Biden’s spending plan adds risk to his expectation that the Fed will make its first rate hike in March, given that “most Fed officials probably expected the BBB or something similar became law ”.