US economic recovery on track: Moody's

Moody's Investors Service said it does not expect the Covid Delta variant's spread to derail the current US economic recovery.

Its baseline forecast for US real GDP growth is 6.5 per cent this year and 4.5 per cent in 2022. The Bureau of Economic Analysis on August 26 revised its US second-quarter annualised GDP growth estimate to 6.6 per cent from 6.5 per cent.

Still, near-term risks to our outlook are tilted to the downside. A slower return to normal conditions in the reopening services sectors and more prolonged supply chain constraints will likely dampen the pace of recovery, but only temporarily.

Similarly, labour frictions (that is difficulties in finding workers despite high unemployment) in highcontact service sectors could linger for longer if the return of unemployed individuals to the labour force is delayed.

"We expect strong consumer demand, backed by strong household balance sheets and improving employment and wages, will continue to support US economic recovery," said Moody's.

Data shows that personal disposable income rose 1.1 per cent in July, boosted in part by increased privatesector wages and salaries. The labour market is booming with the economy adding around 940,000 payroll jobs in June and July despite labour supply frictions. While initial claims for unemployment insurance increased 4,000 to 353,000 for the week that ended August 21, it is unclear whether the Delta spread is affecting the labour market