US: GDP could expand 3.5% in 2022 – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest US GDP figures.

Key Takeaways

“The 4Q 2021 GDP growth was revised higher to 7.0% q/q SAAR (in line with Bloomberg estimate, and slightly better than the advance estimate of 6.9%), a marked improvement from 2.3% in 3Q. For 2021 as a whole, the US economic growth came in at 5.7% (unchanged from advance estimates and is the highest since 1984) following its worst contraction since 1946, at -3.4% in 2021.”

“Growth in 4Q was again attributed to private consumption as well as business & residential investments but it was inventories that played an outsized role in 4Q, responsible for nearly 5ppts of the 7% growth. Two components, government spending and net exports of goods and services, dragged on US headline GDP in 4Q, but it should be noted the recovery in US exports helped cushioned the net exports decline to less than 0.1ppt while the expiry of several federal programs likely worsened the government spending component.”

“Our GDP growth outlook is for slower pace of increase in 1Q due to the temporary impact from the Omicron wave of COVID-19 infections, but growth will resume subsequently, and still be above potential at 3.5% for the full year of 2022. That said, we note the downside risks to growth due to inflation will now be magnified by the soaring commodity prices amidst the Russia-Ukraine conflict.”