Q3 2021 U.S. Macro Outlook | Room for Improvement

by Matt Mullen | Nov 16, 2021
CBRE Econometric Advisors has published the Q3 2021 Macro-Outlook.

Key Takeaways:

-The Q3 2021 slowdown is not emblematic of where the U.S. economy is going. Activity decelerated in late July through September, as a rapidly spreading Delta  variant discouraged many consumers from entering restaurants and boarding airplanes. But public health has improved demand for consumer services and other leading indicators began to rally by late September. Indeed, the pick-up in employment during October was a key signal that improvement is underway. As COVID-19 cases ebb-and-flow this oscillation is poised to continue.

- Consumers will have the wind at their backs. Aside from COVID-19 cases fading—at least for the present—other factors supporting consumption include a tight labor market and sturdy income growth. It is likely that consumption will shift from goods to services this autumn. Goods consumption could slow considerably due to supply bottlenecks and rising prices for some goods.

- There are numerous risks facing the U.S. economy with material supply bottlenecks emerging to the forefront. A shortage across the spectrum of commodities and key feedstock is weighing on the capacity to produce and consume. Policy error is another concern as the failure of Congress to pass key spending initiatives would weigh on the growth trajectory.

- Our outlook for inflation has shifted upward as the combination of heightened demand, supply bottlenecks and wage growth have increased prices by greater
than 5% year-over-year (Y-o-Y). But many of the factors driving CPI are transitory and inflation should fall back to the low -2% range by the end of 2022. It should be noted that this situation is fluid, and the risks are currently tilted to inflation coming in higher than expected.

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