Macro-eco | La revue de presse économique et financière

Keeping cards lose to the chest

Key points

  • After the vertiginous growth of the first half of 2021, some “digestion phase” was always to be expected in the US but some macro indicators point to some “organic” downside forces as well, amid the resurgence of Covid concerns.
  • In this configuration, the Federal Reserve (Fed)’s prudence, expressed by Powell in Jackson Hole, is warranted.
  • The European Central Bank (ECB) is not in a hurry to clarify the ambiguities left by its revised forward guidance.

As the summer ends, economic growth is moving away from the “spectacular rebound” of the first half of the year to a more sedate pace as the reopening is being digested. The issue though is how much of the slowdown is mechanistic – activity cannot “catch-up” forever – and how much is “organic”, to borrow a word from Philip Lane. The resurgence of pandemic concerns ranks first on the list of “organic forces”, and on this front, it is the US which is the most problematic.

A puzzling development is that the break between the number of cases and hospitalizations – the immediate benefit of the vaccines – which has been observed in Europe is not happening in the US, despite a very decent vaccination rate. A possible explanation is that the number of cases in the US is largely under-estimated, since testing is now very low there. The generally lower stringency of sanitary measures over there relative to Europe may explain why the delta variant is spreading so quickly.

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