US Economic Outlook: A delicate balancing act ahead in 2022

Topic: The rampant spread of Omicron highlights that the economic outlook continues to depend on the course of the Covid virus. There will be a delicate balance between the fallout of this rapid strain versus encouraging news that show Omicron is less severe than prior variants. Real GDP growth likely exceeded a 7% annualized pace in Q4, but consumer spending cooled in November, indicating slower spending momentum heading into Q1. Further, the rapid spread of the Omicron variant signals Q1 2022 real GDP growth is on course to be closer to 2.5%. The good news is that after the winter chill, activity should rebound, placing real GDP growth at a sturdy 4.1% pace – though this is down 0.3ppts from our December baseline forecast. We believe inflation dynamics will remain M.E.S.S.I. with inflation peaking in early 2022. Still, cooler demand, a shifting spending mix, and rebounding supply will lead to a better balance between supply and demand by mid-year allowing disinflation to take hold. The Fed faces the ultimate balancing act as it tries to quell the elevated pace of inflation without stunting the economic expansion.

Kathy Bostjancic

Chief US Financial Economist

Kathy Bostjancic

Chief US Financial Economist

Kathy Bostjancic | Chief US Financial Economist

Kathy Bostjancic is Head of U.S. Macro Investor Services. She is responsible for assessing the impact of macroeconomic forecasts and analyses on the financial markets. She will present the economic outlook and market implications to U.S. asset managers and other clients, and she will be a media spokesperson. Kathy will also lead and collaborate on multiple consulting projects for U.S. clients.

Lydia Boussour

Lead Economist

Lydia Boussour

Lead Economist

Lydia Boussour | Lead Economist

Lydia joined Oxford Economics in 2018. She primarily covers US economic and monetary policy developments and provides analysis of high-frequency economic indicators. Prior to joining Oxford Economics, Lydia spent five years at Evercore ISI as a US economist, providing clients with timely analysis on the US economy. She also worked at Société Générale in London and New York as a research associate on the global economics team.

Back to Events

Related Services

Event

Asia’s medium term growth outlook and its implications for major cities

Over the next five years, economic growth across Asia is likely to diverge especially with two of the giants moving in opposite directions; China slowing and India starting to realise its potential. This has implications for how the cities in these two countries are likely to expand. Major cities in southeast Asia area expected to perform relatively well but there are contrasting fortunes elsewhere. For example, in advanced Asia, the major cities of Australia should exhibit an impressive rate of jobs growth. Our expectations for the likes of Melbourne and Perth contrasts starkly with major East Asian cities in Japan and South Korea, where the pressures of ageing populations is dragging on the potential for growth in output and jobs. We present both a top-down medium-term macro outlook and tie that to how major cities in Asia are likely to develop over the next 5 years.

Find Out More

Event

A health-check on China’s real estate and construction industries: Are we still on life support?

China’s property downturn continues to weigh on the outlook. Can we be hopeful that the economy will successfully decouple from its old property-led growth model? How much of an offset can state-led construction provide as authorities look to prop the economy up? Join us in a discussion between Louise Loo our China Macro-economist and April Skinner our China Construction economist, as we address some of the FAQs around China’s housing and construction sectors and take a pulse-check on property’s multi-year correction process. Key talking points: How far does China’s real estate downturn have to go? What are the longer term implications for building construction? How much can state-led infrastructure projects prop up the economy? Will the “New Three" Industries keep the economy afloat? Supply chain risks and what this means for costs and construction.

Find Out More