MULTIPLE FACTORS WILL WEAKEN THE MOMENTUM OF THE U.S. ECONOMIC RECOVERY

 Due to the accelerated spread of the Omi Keron strain of the new crown mutant virus in many countries, investor concerns have risen again recently. The analysis pointed out that under the superimposed effect of factors such as the accelerated spread of the epidemic, the obstruction of key spending bills in the US Congress, and the Fed's acceleration of the shift in monetary policy, the US economic growth momentum may weaken.

　　Pandemic fears rise

　　 Recently, the Omi Keron strain has accelerated its spread throughout the United States, causing a serious rebound in epidemic indicators. The US Centers for Disease Control and Prevention website published the model forecast data on the 20th. As of the week of December 18, Omi Kiron strain infections accounted for 73.2% of the total number of cases, and the Omi Kiron strain has replaced Delta. The strain became the dominant mutant strain in the United States.

　　According to Reuters, the Omi Keron strain has also become the main mutant strain spreading in the new crown epidemic in London. British Prime Minister Boris Johnson said on the 20th that government officials have decided not to tighten epidemic prevention for the time being, but "do not rule out the possibility of further measures." The Mayor of London Sadiq Khan announced on the 20th that London will cancel large-scale New Year celebrations.

　　Investors’ worries increased and European and American stock markets generally fell on the 20th, and international crude oil prices also fell significantly on the 20th.

　　 Mitsubishi UFJ Financial Group analyst Lee Hardman said that there was more evidence over the weekend that the impact of the Omi Kiron strain has hurt investors’ risk appetite. The stricter bans imposed by the Netherlands have made people more worried that other European countries will adopt similar measures in the coming weeks.

　　Critical spending bill is blocked

　　 U.S. Democratic Senator Joe Manchin said in an interview with the media on the 19th that he would not support the "Rebuild a Better Future" spending package proposed by President Biden. As Manchin played a vital role in voting for the bill, his statement means that the spending bill is hopeless to be passed this year.

　　 The scale of the "Rebuild a Better Future" bill is US$1.75 trillion, hoping to help American families reduce child support costs and drug expenditures, and increase investment in climate change response to smooth the transition to clean energy. The bill has been passed by the U.S. House of Representatives and is awaiting a vote in the Senate. Senate Democratic leader Schumer said he will vote on the bill after the New Year holidays.

　　Analysis pointed out that Manchin’s public statement made the Senate’s voting results full of uncertainty.

　　Although Biden has had many talks with Manchin, Manchin still expressed concerns about a number of items in the bill, such as climate change response clauses and child tax exemption program expenditures. Manchin believes that this bill's expenditure is too large and will further aggravate the inflation problem. Senator Lindsey Graham even referred to the tax exemption clause proposed in the bill as an "inflation bomb."

　　 The Washington Post reported on the 20th that Manchin submitted a bill proposal to the White House last week that he hopes that the size of the bill will gradually reach $1.8 trillion in ten years, but that the child tax exemption plan will be cancelled.

　　Manchin said on the 20th that he only supports a spending plan of US$1.5 trillion. If he wants to expand the expenditure to US$1.75 trillion, he must include tax reforms.

　　Manchin’s statement and the recent epidemic situation are a big setback for Biden. The inflation problem has caused headaches for Biden and American consumers. In November, the US Consumer Price Index (CPI) rose 0.8% month-on-month and 6.8% year-on-year, the largest year-on-year increase since June 1982. A recent poll found that nearly 70% of Americans disagree with Biden's performance in tackling inflation.

　　 The deadlock in the U.S. Congress on the "Rebuild a Better Future" bill has made some Americans worried. If the bill is not passed as soon as possible, the child tax exemption program that was implemented last summer will soon expire, and it will be difficult for millions of families to continue to receive cash assistance.

A study by Columbia University in the United States shows that the Children’s Tax Allowance Program provides a monthly subsidy of US$300 for each child under the age of 6, and a monthly subsidy of US$250 for children between the ages of 6 and 17, and has helped 3.6 million US dollars in October this year. Children got rid of poverty.

　　 Economic growth prospects weakened

　　 This summer, the spread of the delta strain of the new coronavirus mutant caused a rebound in the U.S. epidemic. Personal consumption expenditure and employment growth have significantly slowed down. Coupled with the combined effects of supply bottlenecks and high inflation pressures, the U.S. economy hit the lowest growth rate in the year in the third quarter.

　　 Some economists originally expected that as the epidemic eased and the peak sales season at the end of the year arrives, the U.S. economic growth rate is expected to rebound. However, it seems that the emergence of Omi Keron strain may not only drag down consumer demand, but may also continue to disrupt the global supply chain.

　　 Goldman Sachs Group has lowered its GDP growth forecast for the first quarter of 2022 from the previous 3% to 2.5%, and its GDP growth forecast for the second and third quarters of next year has been lowered by 0.5 and 0.25 percentage points, respectively. Goldman Sachs Group Chief Economist Jan Hutchius said that since the consumer price index may not fall until it reaches 7% in the next few months, the inflation concerns expressed by Manchin and other lawmakers are likely to continue, which makes spending Passing the bill is more difficult.

　　Forex broker Jiasheng Group senior analyst Joe Perry said that the Omi Keron strain casts a shadow over the market prospects at the end of the year. The bill's failure to pass through the congressional barriers also dampened market sentiment. If the bill fails to pass, it will have a negative impact on US economic growth.

　　 Mark Zandi, chief economist of Moody's Analytics, said that the U.S. economy faces many uncertainties. If the bill is not approved, economic growth in the fourth quarter of 2022 may slow down sharply to below 1.5%.

　　 Other analysis pointed out that in addition to the uncertainty in the implementation of fiscal support measures, the Fed’s monetary policy may also weaken the momentum of economic recovery next year. The result of the superposition of the two is that the growth rate of the US economy may slow down next year.