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Economic Outlook for 2022: ADB

Growth in the main advanced economies this year will be slightly lower than expected in September, according to the economic outlook of the Asian Development Bank (ADB).

For starters, consumption slowed on Covid-19 surges and weakening fiscal support in the United States and Japan dampened third-quarter results, prompting downward revisions to growth forecasts for all of 2021. .

This was partially offset by strong third quarter growth in the euro area.

Together, the major advanced economies are now expected to grow 4.8% in 2021 and 4.0% in 2022.

In particular, GDP growth in the United States slowed to 2.1% qoq in the third quarter in seasonally adjusted annualized terms.

Aside from the resurgence of Covid-19 cases, the slowdown in growth reflected the disappearance of strong government fiscal support.

Consumer confidence declined during the third quarter and continues to be driven by changes in new cases of Covid-19 infection.

At the same time, the Purchasing Managers Index softened in the third quarter, correctly indicating somewhat slower industrial production, slowed in part by supply chain disruption.

However, the index improved in the fourth quarter mainly due to increases outside the manufacturing sector.

Economic outlook

Likewise, the unemployment rate in the United States continued to fall to 4.2% in November.

But nonfarm employment added just 210,000 new jobs that month, the lowest monthly gain in 2021.

To promote its maximum employment and price stability goals, the Federal Reserve is committed to keeping its target federal funds rate low, but decided to begin lowering its monthly net asset purchase rate in November and December 2021 by $ 10 billion. $ 5 billion for Treasury securities and $ 5 billion for agency mortgage-backed securities.

With the smooth evolution of the third quarter, according to ADB projections, the US economy will grow more slowly than expected.

Even assuming that the growth rate recovers in the fourth quarter, the growth forecasts are adjusted to 5.5% for 2021 and 3.9% for 2022.

As a result, it will take longer for the economy to regain its pre-pandemic value.

Europe

Also as part of the ADB economic outlook, the euro area recovery accelerated further in the third quarter of 2021, but rising headwinds will dampen growth in the fourth quarter.

GDP growth soared to an all-time high of 9.1% in the third quarter quarter-over-quarter, or 3.7% yoy, driven by strong consumer spending, which continued to rotate from durable goods to services.

However, leading indicators suggest that global supply bottlenecks that have weighed on industrial production since August, as well as the recent spike in Covid-19 cases, will limit growth in the fourth quarter.

Before picking up somewhat in November, the manufacturing purchasing managers index fell to a 16-month low of 53.3 in October, while the services index fell to a six-month low of 54.6, dragging the composite index down to 54.2.

Additionally, economic sentiment declined from 118.6 in October to 117.5 in November amid mounting concerns about a fourth wave of Covid-19.

ADB expects the re-imposition of stricter restrictions in Germany and other countries, and the emergence of the new variant of the Omicron coronavirus, will curb consumption and economic activity in the currency bloc in December.

 

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