An analysis issued by IHS Markit this week made that case that despite the increasing uncertainty regarding the spreading Delta variant, of the coronavirus, that the trajectory of the ongoing economic activity remains on solid footing.
That was reflected by Joel Prakken, chief U.S. economist and co-head U.S. economics, IHS Markit, and Chris Vavares, co-head U.S. economics, IHS Markit, in the firm’s August U.S. economic forecast.
“Despite another downward revision to our forecast of real GDP growth in 2021, and emerging risks posed by the spread of the delta strain of the coronavirus, the current economic recovery remains on solid footing,” they observed. “Strong final demand and lean inventories—against the backdrop of expansionary monetary and fiscal policy—support our forecast of 6.1% GDP growth this year and 4.4% next year.”
As for the impact of the Senate’s pending vote on the Infrastructure Investment and Jobs Act before sending it to the House for consideration, they said its analysis suggests the effect on near-term GDP growth of the legislation will be quite modest.
Even with the downward GDP revision, these forecast figures still loom large, given where things currently stand, and, of course, where they were prior to the pandemic.
For the former, as we all well know, the pandemic, in many ways, acted as a catalyst, of sorts, for economic growth. That is not meant in a crass way, at all, it is more so based on commentary from corporations, lawmakers, and policy wonks alike.
While the GDP forecast number looks good on paper, one also needs to remember that it is coming at a time when the myriad supply chain issues occurring are, and have been front and center for more than a while now.
What issues specifically? Well, there are many, including: lack of containers sorely needed to keep up with elevated U.S.-bound imports and the need to boost export growth, which is sorely lacking; the driver shortage and general lack of labor availability for basically all supply chain and logistics personnel; record-low inventories that need to be re-filled; the ongoing semiconductor shortage and its subsequent impact of things like auto production; and a shortage or raw materials needed to keep assembly lines humming (depending on the sector).
On top of all this, is the impressive recovery taking hold within the services economy, which was somewhat expected earlier in the summer, when people were getting vaccinated at a pretty rapid clip, coupled with a healthy dose of optimism about the reopening of the economy.
Well, the Delta variant clearly has muddied the waters on that front, but most lawmakers and supply chain stakeholders are not expecting a full-on lockdown returning anytime soon, largely due to the significant—and likely detrimental—impact it would have on the economic recovery. But that does not mean that it is not a big deal and requires a watchful eye, at the same time.
And it certainly means that the ongoing (permanent) emergence of the e-commerce supply chain also is here to stay, too. How could it not really? That can be the focus of another column.
While things remain largely uncertain, in many cases, there are clearly things to be optimistic about, too, as evidenced by the strong economic output occurring, and the role of supply chain and logistics in moving the goods and freight needed to keep the economy moving. There is a lot to monitor and keep an eye of, and our industry’s role, presence, and how we execute is, and remains, front and center.