US growth crash begins

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Morgan Stanley with the note:

We are revising down 3Q GDP tracking to 2.9% from 6.5%, previously. Our forecast for 4Q GDP remains at 6.7%. The revision to 3Q implies full year 4Q/4Q GDP at 5.6% (5.7%Y) this year – 1.4pp lower than the Fed’s forecast of 7.0% in its June Summary of Economic Projections (SEP), and 0.7pp below Bloomberg consensus of economists at 6.3%.

We have anticipated a sharp slowdown in 2H GDP growth, but looked for a more even distribution across the remainder of the year – payback instead has been front-loaded. An examination of the data reveals that the slowdown is not broad-based and primarily reflects payback from stimulus spending as well as continued supply chain bottlenecks. The swing factor is largest in spending on big-ticket durable goods that benefited most from stimulus checks and are affected most by lack of inventory and price increases due to supply shortages, for example motor vehicles.

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About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.