BlackRock Investment Institute

Macro insights

Slowing growth momentum

Growth momentum has slowed in the U.S. and euro area over the summer even as the absolute level of activity stays elevated. September activity surveys showed a drop in both manufacturing and services. Several factors are at play.

Rising Covid infections have weighed, especially in the U.S. Concerns about the quality and cost of labor loom large for U.S. firms – more so than in the euro area where demand concerns – particularly in the service sector – are a bigger challenge. Supply chain disruptions are being felt by both, and European manufacturers see this as their biggest problem at the moment, according to surveys.

But recovery continues

Chart showing U.S. and euro area GDP forecasts suggesting the recovery will continue

Sources: BlackRock Investment Institute and Bureau of Economic Analysis, with data from Refinitiv Datastream, September 2021. The chart shows the average annualized month-on-month U.S.  core PCE inflation rate over a range of backward-looking windows, from three to five years long.

We expect these temporary frictions to resolve and for GDP in both the U.S. and euro area to return to pre-Covid trend in 2022. See the chart. U.S. GDP is projected to be a touch lower in the near term than prior projections, yet growth in 2022 is stronger and the gap is eliminated by the end of next year. In Europe, activity projections have been downgraded in the past few weeks, but the latest expectations still remain above those from July.

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Elga Bartsch
Head of Macro Research
Read bio
Nicholas Fawcett
Macro Research

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