WASHINGTON: The US economy will take an early hit this year from the Omicron variant of coronavirus - but the damage shouldn’t last beyond the first quarter, according to Bloomberg’s latest monthly survey of forecasters.
Expectations for growth in gross domestic product for the January-March period dropped to 3 per cent, from 3.9 per cent in the previous monthly survey. Forecasts for inflation, however, were marked up for each quarter into 2023, reflecting prolonged problems with supply chains that risk being exacerbated by omicron, report agencies.
“Growth momentum does appear to be stalling out,” Aneta Markowska and Thomas Simons at Jefferies wrote in a report this week, predicting a 1.5 per cent first-quarter expansion. Among other indicators, they point to a sharp decline in office occupancy that’s reversed almost all of last year’s back-to-work drive, and will “create negative knock-on effects in the near term as demand for services takes a hit.”
“We expect the omicron hit to GDP to be short and sharp. And the rebound should be just as swift. Conditional forecasts based on our daily GDP tracker suggests activity to trough in early February, and a rebound would be in full swing by the March FOMC meeting,”said Anna Wong, chief US economist at Bloomberg Economics.
Still, the Jefferies economists - like most of their peers - remain relatively upbeat about growth in subsequent quarters. The median forecast in the Bloomberg survey calls for growth to average 3.8 per cent this year, down just 0.1 percentage point from a month earlier.
The economy’s latest virus-induced slowdown is apparent across a range of high-frequency data. Restaurant bookings, which had more or less climbed back to pre-pandemic levels before Omicron’s arrival in late November, are down about 30 per cent.
Delta Air Lines said Thursday that sick employees, as well as winter storms, caused more than 2,000 flights to be cancelled in recent weeks. But the carrier said that it expects the Omicron wave to peak in the next few days, with revenue forecast to rebound within about four to six weeks after that.
Inflation estimates, meantime, were raised for each quarter of the year. In part, that’s likely a consequence of the omicron effect on already-snarled supply chains, with more factory shutdowns possible in Asia, and already-tight labour markets at home.