US economic growth is expected to accelerate in the last quarter of 2021, driven by consumer spending and business investment, before disruptions of the Omicron coronavirus variant became widespread.
Economists forecast a 5.5 percent year-on-year growth in U.S. gross domestic product in the fourth quarter, according to Reuters, from 2.3 percent in the third quarter.
GDP is expected to have risen by 1.3 per cent compared to the previous quarter, based on a measure used by other major economies. The U.S. Department of Commerce will release the report Thursday at 8:30 p.m.
Despite disappointing December retail sales data, consumer spending is expected to be a major contributor to economic growth, as Americans holiday shopping early amid concerns that the supply chain snores could lead to bare store shelves.
“A lot of it is linked to the environment we saw at the end of last year, with balance sheets in overall good standing, rising wages and rising employment,” said Oren Klachkin, chief economist at Oxford Economics.
Business investment and inventory are also expected to have supported growth at the end of last year as companies replenished their inventory, although supply chain disruption and unbridled inflation were an obstacle to recovery.
Economists have warned that the spate of Covid-19 infections caused by Omicron will deliver a sharp but short-lived hit to economic activity in early 2022. Americans have cut back on food and air travel, while plans for workers to return to their offices return was delayed, affecting spending in commercial areas.
The IMF warned this week that the global economic recovery from the pandemic would face several obstacles. It cut its forecast for US economic growth this year to 4 percent, down from 5.2 percent in its October outlook.
Federal Reserve Chairman Jay Powell said on Wednesday he expects some moderation in the Omicron Gulf economy, which began to ripple across the U.S. in late December, but that the effects will be temporary.
The Fed looked beyond Omicron concerns and indicated its intention interest rates rise in March while continuing plans to tighten monetary policy and curb persistent high inflation.
With markets failing four rate hikes and balance sheet declines this year, concerns have risen that aggressive austerity could take some steam out of the economy. But James Knightley, international chief economist at ING, said “it can actually boost confidence by getting a grip, as inflation is a real concern for households and businesses”.