The US economy is looking to recover with a reduction in pandemic lockdowns.
Based on the Department of Commerce’s figures, the economy grew 5.7% in 2021 – the best performance recorded since 1984.
With that, many analysts expect growth to slow down this year. This seems to be in light of the Federal Reserve’s interest rate hike, and the US government’s reduced stimulus spending.
Other negatives may also affect growth rates this year. Omicron is one, being the new dangerous strain of COVID-19.
The World Bank sees US economic growth in a positive light. It expects the economy to grow by 3.7% in 2022.
It’s not a high rate of growth, but there seems to be just behind that number.
The most important is the weak start America experienced this year. With Omicron, growth rates fell a bit, and this may carry over throughout the year.
Recovering Consumer Market
2020 was a horrible year for the US, but the country has been recovering well since then.
Government stimulus has helped the economy rebound, and so did consumer spending, even though GDP fell by 3.4% at the pandemic’s start.
The US labor market is also recovering. 19 million jobs have been regained from the 22 million lost through shutdowns since 2020.
The last 3 months of 2020 also showed signs of hope. Output remained high, with an excellent annual growth rate of 6.9%.
The positive figures have even been cited by President Biden, claiming them as the results of government recovery spending.
US Government Plans for the Future
As stimulus checks from the pandemic slow down, President Biden has started discussions with Congress on spending plans that support other public areas.
These include child care, manufacturing, and renewable energy.
So far, the agenda hasn’t been received well by Congress. And as a result, the American economy may have to do without the suggested boosts.
Federal Reserve’s Reactions
26th January saw Jerome Powell (Federal Reserve chair) imply that officials have planned to raise interest rates by March this year.
That’ll be the first time the US raised key interest rates since 2018.
The justification seems to be a necessity. So far, the Federal Reserve sees that the US economy no longer needs low-cost borrowing to help it recover from 2020.
Wells Fargo analysts seem to follow a similar opinion – seeing that the next two years will test the economy’s growth rates with a lack of fiscal policy support.
Quick Growth and Quick Price Hikes
With the fast growth, the US economy is also experiencing one of its highest inflation rates in four decades.
Major Banks have designated inflation as a transition phase, which should fade as supply-chain issues (caused by COVID) improve throughout the new few years.
Many analysts however have blamed the Federal Reserve for slow response rates on the issue. Others see that the Fed may be too aggressive, leading to less borrowing demand in the future.
US stocks have also been declining throughout late December to January – mostly caused by the Omicron strain.