Spain's Christmas lottery is a distraction from the pandemic

WASHINGTON (AP), The Commerce Department reported Wednesday that the U.S. economy grew by 2.3% in the third quarter. This is slightly more than was previously expected. However, the rapid spread and impact of the coronavirus is threatening prospects of a solid recovery.

Spain's Christmas lottery is a distraction from the pandemic

The nation's total output of goods was 2.1% higher than the previous month's figure. This is the third and final view of the Gross Domestic Product's performance.

This newfound strength was mainly due to stronger consumer spending than previously thought and businesses rebuilding more inventory than initially estimated.

After the explosive growth in the third quarter, which began as the country was recovering from the pandemic, the 2.3% gain in the third quarter follows that of the economy. The first quarter saw growth of 6.3% and the second quarter saw growth of 6.7%. Third quarter slowdown was largely due to the emergence of the Delta variant in the summer.

With the new omicron variant and high inflation, there are worries that growth may be limited heading into 2022.

These fears have caused the stock market to experience a volatile ride in recent days. However, new optimism that the omicron risk will be managed has seen the Dow Jones industrial average rise 560 points on Tuesday.

Although all major U.S. stock markets rallied this week they are all in negative territory for the past 30 days.

Economists believe it is too soon to give the all-clear about the potential dangers posed by this new variant.

Sung Won Sohn is an economics and business professor at Loyola Marymount University, Los Angeles. "History is repeating itself with COVID virus suddenly reappearing"

Oxford Economics has reduced its economic growth forecast for the current quarter to 7.8% from 7.3%. This would still be a significant rebound from the third-quarter slowdown.

Goldman Sachs lowered its GDP forecast from 3% to 2% for the first quarter to 3.5%, 3% to 2.5% for the second quarter and 2.75% to 3% in the third quarter after Sen. Joe Manchin expressed opposition to his party’s spending plans.

Kathy Bostjancic is the chief U.S. financial analyst for Oxford. She stated that the firm's current assessment was the following: The resurgence COVID-19 could decrease growth next year from 4.3% - 4.1%, and that if Biden’s Build Back Better program gets completely derail, that could likely shave another 0.4% in 2022, dropping it to 3.7%, and a half point from growth in 2023, cutting it to below 2.2%.

According to these assumptions, she said that job growth could be 750,000 less by next year if the economy slows down as she fears.

Bostjancic stated that Omicron was so prevalent. "We believe it will take a very big toll on the economy."

It is not only the resurgence COVID that will hold back the economy next year. The Federal Reserve has begun to reduce the huge amount of support it provides to the economy in order to combat inflation. Inflation has risen to its highest point in almost 40 years.

Economists predict that GDP growth will be around 5.5% this year, which would mark a significant improvement from the 3.4% decline in 1984 and 22 million job losses caused by the global pandemic.

Wednesday's report revealed that consumer spending, which accounts to two-thirds economic activity in the U.S.A., increased at a 2% pace in the third quarter. This is down from the 12% increase in the April-June period, but higher than the 1.7% quarterly gain last month.

Economists are now concerned by the uncertainty of what lies ahead.

Rubela Farooqi (chief U.S. economist, High Frequency Economics) stated that "the omicron variant poses an upside risk in the short term as supply-chain disruptions or shortages that could constrain households and businesses over the coming months."

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