The Omicron variant is expected to grow the global economy in early 2022

A winter surge in Covid-19 cases fueled by the Omicron variant is prompting economists to downgrade US and global growth expectations into early 2022 as businesses grapple with the situation. absenteeism and consumers stay home to avoid getting sick.

In Europe, leaders have been considering whether to introduce new limits on activity as New Year celebrations approach. The UK government decided against tightening restrictions after reviewing hospital admissions data, but Health Secretary Sajid Javid said people should spend New Year’s Eve outside if possible.

US officials are looking for a way to relieve pressure on hospitals It also minimizes business interruption.

Mark Zandi, chief economist at Moody’s Analytics, downgraded his first-quarter US gross domestic product forecast from 5.2% growth to 2.2% because he “could see economic damage.” economic growth in the first quarter.”

Shoppers browsed at Brookfield Place in New York City on Monday.


Photo:

Image by Scott Heins / Getty

Mr. Zandi pointed out that spending is softer on tourism and Canceling sporting events and Broadway show caused by the Covid-19 outbreak.

“It feels like a very similar dynamic as when Delta hit, when it comes to the Delta variant of Covid-19 that caught the attention of the US in the summer,” Mr. Zandi said. He initially expected economic growth of 6.1% in the third quarter; Finally, the economy expanded at a rate of 2.3% from July to September.

According to the Federal Reserve Bank of Atlanta’s GDP forecaster, the economy is estimated to have grown at an annualized rate of 7.6% in the current fourth quarter.

Economists have struggled to predict the impact of Covid-19 on economies throughout the pandemic, including in the US, where there have been shifts in the labor market surprised both the government and forecasters.

Credit and debit card data from JPMorgan Chase showed spending in service-related categories like airlines and restaurants still fell last week.

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People line up for Covid-19 tests at a pop-up website in Manhattan on Monday.


Photo:

JEENAH MOON / REUTERS

Currently, the highly contagious Omicron variant is “changing people’s behavior” and reducing the need to spend on services that make up a large part of the increase, said Ian Shepherdson, chief economist at Pantheon Macroeconomics. economic growth while people stay home, said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Pantheon Macroeconomics recently lowered its annual U.S. growth forecast to 3% for the first quarter of 2022 from 5%, joining several other forecasters in lowering growth forecasts for early 2022. Others are expressing concern about the downside risk to their existing forecasts.

“Unfortunately [the Omicron variant] Pooja Sriram, US economist at Barclays, said: “She did not downgrade her growth forecast for the first quarter but said she is closely monitoring the outbreak.

While the US has not imposed a shutdown, “we do see some types of voluntary social distancing if people start canceling travel plans and become hesitant about using accommodation, that will affect growth and employment,” Ms. Sriram said.

For Natalia Arbelaez, the rise of Omicron was the pandemic’s last ray of light on her playground business.

Over seven years, Ms. Arbelaez has built Busy Bees, a popular chain of three indoor playgrounds in suburban Washington, DC, that cater to children. Despite raising her wages to $15 an hour earlier this year, she said she struggled to find enough workers, forcing her to close one location in June.

Now, the new variant has caused customers to cancel birthday party reservations, leaving the other two locations unable to open, she said. Busy Bees will be closing permanently on January 1st.

“I’ve been fighting hard since March 2020 and here we are, close to January 2022,” she said. “Although it is very sad, I feel lighter. I carried a lot of weight on my shoulders.”

Earlier this month, the chief economist for the Organization for Economic Co-operation and Development warned that if the new Omicron variant of the coronavirus surpasses existing vaccines, the world economy could face a major downturn. sharper than previously expected decline.

In UK, record infections before Christmas put pressure on PM

Boris Johnson

put in place more stringent measures to ease the pressure on hospitals. However, Mr Johnson, who is facing tighter restrictions from within his party, said there was not enough information on the new variant to justify imposing them before Christmas. Current government guidance in the UK is for people to work from home and avoid unnecessary social contact. In Scotland, Northern Ireland and Wales, limits were placed on social gatherings and mass events as Omicron spread.

However, the new variant has kept many Britons at home for the festive period, prompting businesses to seek economic aid. Last week, the UK Department of Finance provided grants of up to £6,000 (about $8,062) to businesses in the hospitality sector.

Recent spending data suggests that an increase in the Omicron variant could prompt people to cut back on spending outside of the home. Restaurant visits in December decreased as more people stayed at home. For the week ending December 26, the number of diners sitting in US restaurants fell 27% from 2019 levels, the biggest disparity since April, according to data from OpenTable.

In-store spending at retailers and restaurants also fell in late November and early December. In the week ended November 30, spending fell 5.3% from the previous week. In the week ended December 7, it fell 5.6% before gaining 3.4% for the week ending December 14, according to payment card spending data tabulated by the Commerce Department.

The outbreak of the disease Omicron sent sick employees home amid a staffing crisis that forced employers to cling to workers. Claims for unemployment benefits hovered at their lowest level in more than half a century for the week ending Dec.

However, consumer demand for gifts remains steady in the run-up to the festive season. Americans have been spending at a brisk pace during the shopping season, as they flock to stores early due to worries about Covid’s supply and delivery issues.

US retail sales up 8.5% from November 1 to Christmas Eve compared with the same period last year, according to

Master Card

SpendPulse, which tracks sales in the Mastercard payments network along with survey-based estimates for cash and checks.

For now, economists expect the highly contagious Omicron variant to provide a short-term soft patch for US spending and broader economic growth. It comes as central banks across the globe set out expectations that interest rates will rise next year in an attempt to rein in inflation. The Federal Reserve has set the stage for a series of hikes that begin next spring.

Write letter for Harriet Trucks at harriet.t sorry@wsj.com and David Harrison at david.harrison@wsj.com

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https://www.wsj.com/articles/omicron-variant-is-expected-to-dent-global-economy-in-early-2022-11640631554?mod=pls_whats_news_us_business_f The Omicron variant is expected to grow the global economy in early 2022

Ian Walker

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