The U.S. economic recovery from the COVID-19 pandemic has taken a bit of a breather as the Delta variant spreads and weighs on how consumers spend.
"I would say what we have seen in monthly data — and even in real-time data — there is basically a stall in activity. We are certainly not contracting. It's a stall driven by certain sectors, those that are obviously more receptive to the Delta variant," said Aneta Markowska, Jefferies' chief financial economist, on Yahoo Finance Live.
Markowska's work shows some drop-off in COVID-19 sensitive areas of the economy this month, notably hotel bookings and restaurant visits. The downshift in momentum has caused Markowska to lower her third quarter GDP estimate to around 3% from approximately 7% before the quarter started.
The stall in the economy is likely temporary, contends Markowska.
"I think there is a good chance we get it back [lost growth] in the fourth quarter and early 2022. The fundamentals really have not changed. We are still looking at the healthiest household balance sheets in decades, the lowest inventories pretty much on record, capex intensions are very strong. None of that has changed. This is really just another delay in this recovery cycle that I think still has pretty long legs," Markowska explains.
The economist isn't alone in becoming more concerned on recovery amid a drumbeat of softening economic reads in August, ranging from consumer confidence to retail sales.
Earlier this month, Goldman Sachs chief economist Jan Hatzius cut his U.S. GDP growth estimate to 6% for this year due to Delta variant concerns. Previously, Hatzius was modeling for 6.4% growth.
The closely followed economist followed that up with more cautious commentary in a new note on Tuesday.
"The impact of the Delta variant on growth and inflation is proving to be somewhat larger than we expected. We have lowered our Q3 GDP forecast to +5.5%, reflecting hits to both consumer spending and production," Hatzius said. "Spending on dining, travel, and some other services is likely to decline in August, though we expect the drop to be modest and brief. Production is still suffering from supply chain disruptions, especially in the auto industry, and this is likely to mean less inventory rebuild in Q3."
Earlier this year, Hatzius had expected third quarter GDP growth of 9%.