The surge in the virus is causing us to revise the timing of economic growth

The surge in the Delta virus is finally catching up with the economy. We are reducing our forecast for third quarter Real GDP growth from above 6% to 3.5% as a result of the impact of the virus. We now expect consumption spending will be well below the level we had been forecasting. Most of the reduced expectation is in the services sector of personal consumption expenditures as fewer people dine out, travel or go to bars. However, this condition is also affecting the supply chain problems. Auto companies are shutting manufacturing facilities for lack of parts and workers. As a result, the inventory build we had been expecting in the third quarter will be much lower than assumed in our first forecast. Unlike past impacts of the pandemic, there appears to be no help with additional fiscal stimulus with Congress locked along partisan lines.