the US economy is booming again

  • A wave of positive economic data prompted JPMorgan and Morgan Stanley to boost their growth forecasts on Wednesday.
  • The Atlanta Fed’s growth tool was also improved, and growth in Q4 will be the strongest since Q3 2020.
  • Estimates suggest that the U.S. economy is booming as employment rebounds, and Americans are spending big bucks on vacation.

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The recovery in 2021 is coming out with a bang.

Economists were flooded with new data Wednesday, most of it good news for the United States. Weekly applications for unemployment benefits fell to their lowest level since 1969. Inflation rose higher, but not as high as economists expected. U.S. spending throughout October was stronger than expected.

Taken together, the reports signal that the recovery is charging faster than expected. That was enough for Wall Street to lift their fourth-quarter growth forecasts. Morgan Stanley economists raised their estimate for growth in the current quarter to 8.7% from 3% on Wednesday, citing the “richness of data” that showed new strength across the economy.

Economists at JPMorgan also raised their hopes for improvement through the end of the year. The bank raised its estimate to 7% from 5% on Wednesday, similarly basing its bullish shift on Wednesday’s data dump. The narrowing of the US trade deficit – how much more the country imports than it exports – was a “remarkable” surprise, suggesting that trade will not be a major impediment to GDP, said the team led by Michael Feroli.

Other reports suggest that the supply crisis, which has weighed on the recovery and driven higher inflation, is finally starting to fade, the bank added.

“The overall improvement in the data may be the first fruit of the modest easing of supply chain problems, which is evident in some of the survey data,” JPMorgan said.

It’s not just Wall Street that is demanding a fantastic fourth quarter. That


Federal Reserve

The Bank of Atlanta’s GDPNow tool, which uses data releases to adjust its growth forecast for the current quarter, rose to 8.6% from 8.2% on Wednesday.

It seems that everyone thinks that the recovery is on the way back.

From fall in third quarter to rise in fourth quarter

The forecasts are all significantly higher than the growth of 2.1% seen through the third quarter. The previous three-month period saw the Delta wave slow down employment and pull economic activity. The growth rate was the slowest of the pandemic’s recovery, and the ongoing crisis in the supply chain raised fears that the economic boom officially ended this summer.

Wednesday data and bank reactions suggest a new boom started in October. Last month, the Delta wave fell and retail sales rose to record highs. If the most rosy forecasts come true, growth in the fourth quarter will be the strongest since the third quarter of 2020, which in itself marked the fastest growth since at least 1947.

The economic boom would also give the Democrats a much-needed victory in the economics department. President Joe Biden’s approval rating has taken a beating through the fall as Americans blame his administration for rising prices and weakened economic growth. Consumer sentiment fell to its lowest decade in November due to “a combination of rapidly escalating inflation combined with the absence of federal policies that would effectively remedy inflationary damage,” said Richard Curtin, chief economist at the University of Michigan’s Surveys of Consumers. Extraordinary growth in the fourth quarter would give the party something to celebrate, especially as midterm elections approach.

It is certain that the greatest risks to recovery are still great. The supply-chain crisis is showing signs of easing, but much remains to be done to address the widespread bottlenecks. Inflation will remain at high levels until the second half of 2022, Finance Minister Janet Yellen said in October. The administration is taking steps to lower the sky-high gas prices, but large producers abroad could counter these efforts.

And even if these issues are resolved quickly, it is probably still too late to save Democrats’ election hopes. The incumbent parties tend to lose control of Congress in their first midterm elections. There is almost no statistical correlation between economic performance and mid-term election results.

Yet what may not be good enough for the Democrats is still good for the country. A booming fourth quarter would help the United States leave the Delta wave in full and place the country much closer to a full recovery.

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