US economic growth is expected to have accelerated in the final quarter of 2021, boosted by consumer spending and business investment, before disruptions from the Omicron coronavirus variant became widespread.
Economists forecast a 5.5 per cent advance in US gross domestic product on an annualised basis in the fourth quarter, according to Reuters, up from 2.3 per cent in the third quarter.
GDP is expected to have risen 1.3 per cent compared with the previous quarter, based on a measure used by other major economies. The US commerce department is scheduled to release the report at 8:30am Eastern time on Thursday.
Despite disappointing December retail sales data, consumer spending is expected to be a major contributor to economic growth, as Americans did their holiday shopping early amid concerns that supply chain snarls could lead to bare store shelves.
“A lot of that is tied to the environment we saw at the end of last year, with household balance sheets in a good position overall, rising wages and rising employment,” said Oren Klachkin, lead economist at Oxford Economics.
Business investment and inventories are also expected to have supported growth at the end of last year as companies replenished their stockpiles, although supply chain disruptions and rampant inflation have been an obstacle to the recovery.
Economists have cautioned that the wave of Covid-19 infections sparked by Omicron will deliver a sharp but shortlived hit to economic activity at the start of 2022. Americans cut back on dining out and air travel, while plans for workers to return to their offices were delayed, which affected spending in commercial areas.
The IMF this week cautioned that the global economic recovery from the pandemic will face multiple hurdles. It slashed its forecast for US economic growth this year to 4 per cent, down from 5.2 per cent in its October outlook.
Federal Reserve chair Jay Powell on Wednesday said he expects some softening in the economy from the Omicron wave that began to ripple across the US in late December, but that the effects would be temporary.
The Fed has looked past Omicron concerns and signalled its intention to raise interest rates in March as it pushes ahead with plans to tighten monetary policy and quash stubbornly high inflation.
With markets pencilling in four rate rises and balance sheet run-off this year, concerns have grown that aggressive tightening could take some steam out of the economy. But James Knightley, chief international economist at ING, said “it could actually boost confidence in that they are getting a grip as inflation is a real concern for households and businesses”.