Stagflation at hand? Inflation, check. Stagnant growth not so much

WASHINGTON (Dec 10) - The rise of a new coronavirus variant has raised fears of a double-barreled hit to the U.S. economy of slowing growth and still-high inflation as supply chains stutter, local governments consider new restrictions and consumers assess the health risks of everything from dining out and traveling to returning to work.

But economists so far see the risk of "stagflation" - that toxic blend of weak growth and strong inflation so feared by policymakers - as only half-baked.

Prices are rising, in the United States more notably than elsewhere, and the pace has proved more persistent than policymakers anticipated. Growth, though, is far from stagnating, and seems on track to continue next year at an above-average pace that could push the United States to full employment in a matter of months.

Some forecasters have tempered their predictions for growth in U.S. gross domestic product because of the new variant. But those revisions have been modest, and high-frequency data on U.S. airline travel and metrics like restaurant visits and credit card spending so far show no obvious change in recent weeks as case counts rose and, more recently, the Omicron variant was identified.

Reuters