Inflation and related problems, such as tangled supply chains, may continue to challenge business leaders and policymakers, but the US economy is performing well by most measures, Deloitte said in a note.
The US economy is likely to feel the impact of a continuing Ukraine crisis through two main channels. The price of oil is likely to remain higher than it would have otherwise—although how much higher is an open question. Russia produces about 12 per cent of global crude oil supplies. Sanctions may remove some of this oil supply, as the United States (and possibly some European countries) reduce or end purchases of Russian oil.
The EU is a major trading partner of the United States, accounting for more than 15 per cent of US exports. On top of a direct decline in demand, dollar appreciation reflecting the relative safety of the United States will make US goods less competitive, Deloitte said. Both would reduce the contribution of exports to US gross domestic product (GDP) growth.
Growth in Europe is likely to take a hit of as much as half a percentage point, even if natural gas deliveries from Russia aren’t interrupted. Second, any geopolitical crisis pushes investors to buy safe assets, mainly US dollars. The dollar’s appreciation will make US exports less competitive, said Deloitte.
In the longer term, Deloitte expects the pandemic to exacerbate some existing problems. It has thrown the problem of inequality into sharp relief, straining the budgets and living situations of millions of lower-income households.
ALCHEMPro News Desk (DS)
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