Global Macro Service > Research Briefings > United States

Macro Musings: A long road to normalcy

The Delta variant dashed hopes that the economy would have returned to normal by now. But aspirations are delayed not demolished. The virus is taking a toll on growth but it is not derailing the expansion. Activity will slow in the current quarter from the robust pace seen in the spring and then regain momentum later this year and into 2022. Households are dispirited by the virus, but they are not going into hibernation. Retail sales posted a solid gain in August, flipping consensus forecast of a decline. Without the big drag from weak auto sales, the gain would have been even stronger. The auto drag reflected supply constraints more than weak demand. Consumers have enough firepower to deliver a solid holiday shopping season. Inflation cooled in August but remain elevated relative to the Federal Reserve’s target. The CPI continues to be roiled by pandemic-related influences, making the underlying trend hard to read. That said, the peak has likely been reached and the trend should gradually recede along with inflation expectations. A small fraction of the CPI basket has accounted for almost all of the inflation increase in recent months. Those prices are now declining, validating the Fed’s belief that the inflation spike is transitory.

To read the full briefing please
If you are not a subscriber, request a free trial of our Global Macro Service by filling out the form below