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Friday, February 11, 2022
CHART: Omicron, Inflation, and Fed Dampen US Growth Prospects
The Conference Board now forecasts that US Real GDP growth
will slow to 2.0 percent (quarter-over-quarter, annualized rate) in Q1
2022. Economic growth through the remainder of the year will be lower
than previously projected, but the economy will still grow at healthy
rates above 2 percent under current assumptions.
Our prior forecasts had assumed that a “winter wave” of COVID-19 would
dampen economic growth in Q1 2022, but the scale of infections was much
larger than anticipated. We are therefore lowering of first quarter
projection by 0.2 percentage points. Beyond that, expectations of
persistent inflation and a more restrictive monetary policy environment
have resulted in downgrades to our growth forecast for Q2, Q3 and Q4
2022.
Sizeable downside risks still weigh on this forecast. While the number
of new cases of COVID-19 are down significantly, there is still a risk
that new, more dangerous variants may emerge. Additionally, tight labor
markets helped drive inflation higher over the course of 2021—as wages
rose rapidly and companies increased prices to offset these higher
costs. If this trend worsens a wage/price spiral may ensue that
exacerbates the inflation problem. Finally, geopolitical tensions in
Europe and Asia present additional economic risks.
For more information on our latest US economic forecast please visit our website.
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