Omicron Variant Triggers US GDP Downgrades
The new COVID-19 Omicron variant is slowing down the economy again, and several analysts have already cut their GDP forecasts for the U.S.
The variant is wreaking havoc on the airline industry, as thousands of flights continue to be canceled partly due to staff and crew testing positive, in the midst of the busiest time of the year for air travel, leaving travelers stranded. The travel industry at large is being hit, as Barron’s reports that on Dec. 27, Omicron’s effect on travel and tourism dented shares of casinos, such as Las Vegas-based MGM Resorts International, which fell 1.2%, Las Vegas Sands, which fell nearly 2%, and Wynn Resorts, which fell 1.5%.
Mark Zandi, chief economist at Moody’s Analytics, is the latest economist growing increasingly concerned about the toll the new variant could take on the economy. Speaking on CNN on Dec.21, he said that he was downgrading his economic outlook for Q1 2022 because of Omicron, from 5% to closer to 2% GDP growth. And that doesn’t even factor in the demise of Build Back Better plan.
“Unfortunately I think Omicron is already doing significant damage to the economy,” he told CNN, according to a tweet.
In an op-ed in the Philadelphia Inquirer on Dec. 26, Zandi wrote that “the pandemic remains central to the economy’s prospects in the coming year. Even after the Omicron wave abates, there are likely to be others. But each new wave should be less disruptive to the health-care system and economy than the wave before it.”
Zandi adds that the most fundamental reason for optimism over the economy’s prospects “is its uncanny ability to adjust to anything thrown at it.”
“Despite the devastating pandemic, as things stand now, it will take no more than three years for the economy to fully recover from the first wave of the virus,” he wrote.
Earlier this month, Goldman Sachs said it was downgrading the country’s GDP, as Chief Economist Jan Hatzius said that the failure of the Build Back Better bill would slow economic growth in 2022, according to a note sent to GOBankingRates.
“BBB enactment had already looked like a close call, and in light of Manchin’s comments, we are adjusting our forecast to remove the assumption that BBB will become law,” Hatzius said in the note.
And on Dec. 1, the Organization for Economic Cooperation and Development (OECD) cut its global economic growth outlook for 2022. The OECD cited the Omicron variant as one factor that could be a threat to recovery.
On Nov. 30, Federal Reserve Chair Jerome Powell also said that the Omicron variant poses increased uncertainty concerning inflation.
“The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation,” Powell said in remarks before Congress at the time. “Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labor market and intensify supply-chain disruptions.”
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