(Bloomberg) -- Economists at Morgan Stanley (NYSE:MS) say they expect the brunt of a second-half growth slowdown to occur in the third quarter, due largely to a payback from stimulus spending and persistent supply chain issues.
Gross domestic product growth in the July-September period is now tracking at 2.9%, down sharply from the previous figure of 6.5%, economists including Ellen Zentner said in a note Thursday.
“Growth in the U.S. economy is coming off a torrid pace in the first half of the year as stimulus spending and a reopening-fueled burst of activity cools,” they wrote.
Less spending on durable goods, including autos, is weighing on growth and inventories remain low. Broad-based declines in activity were seen in August as higher inflation and a rise in coronavirus delta cases weighed on consumer sentiment.
Still, the economy is expanding, and job growth should not be affected, they said. Morgan Stanley maintained its fourth-quarter growth projection at 6.7%. Income growth continues to exceed spending, indicating “buying power has not flagged,” the economists said.
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