More experts believe that the U.S. could be heading towards recession next year

Saturday, May 21, 2022
author picture Noah Rousseau
recession u s economy the fed federal reserve goldman sachs consumer spending inflation more experts believe that the could be heading towards next year

According to economists and banks‚ the U.S. could face a recession within the year. This is because a sudden episode of economic despair shatters financial markets‚ which had previously been counting on continued economic momentum. While major sectors of the economy‚ including consumer spending and the job market‚ remain strong‚ it is becoming increasingly apparent that increasing borrowing costs could lead to a sudden recession for businesses and consumers. This comes after many years of almost zero interest rates. Officials are indicating that more drastic increases may be required to cool down the economy. The Federal Reserve raised interest rates 0.75 percent this year. The uncertainty resulting from Russia's invasion of Ukraine and the coronavirus pandemic are only adding to this unease. For the latest and most interesting news from The Washington Post‚ subscribe to The Post Most Newsletter Mark Zandi (chief economist‚ Moodys Analytics) stated that the recession risks are very high. We need to have some luck and very deft Fed policymaking in order for the economy not to go into recession.

Powell dismissed the possibility of recession after Fed increases rates

Federal Reserve Chair Jerome H. Powell stated that there's a chance the United States will reduce inflation through rate increases without creating a recession on May 4. Ex-CEO of Goldman Sachs Lloyd Blankfein has warned that there is a high chance of recession. Charlie Scharf‚ CEO of Wells Fargo‚ stated that it was clear that the U.S. economic situation is in decline. Ben Bernanke‚ ex Fed Chair‚ cautioned that the country may be at risk for stagflation‚ which is a combination of slowing growth and high inflation. Those concerns come amid a smattering of data that points to economic cooling‚ particularly in interest-rate-sensitive sectors that are already feeling the brunt of the Feds promise to keep tightening monetary conditions. In April‚ new home construction was slower than usual. The mortgage market continues to fall. Some of America's most powerful retailers suffered disappointing profits and sales this week due to higher inventory costs. This was made in order to prevent supply chain disruptions and triggered a stock market crash. Walmart stock fell more than 11% on Tuesday. This was the worst single-day drop in over 35 years. Target stock plunged 26% on Wednesday after a dramatic 52% decline in quarterly profits. Executives attributed this to a cooling demand for large-ticket items like TVs and kitchen appliances‚ as well as outdoor furniture. We expected a slowdown after the stimulus‚ but we were wrong... Targets chief executive Brian Cornell said that they didn't expect the scale of this shift. Our guests often voice their concern about rapidly changing circumstances‚ from geopolitics and the persistently high inflation. Goldman Sachs revised its second quarter forecast of U.S. growth to 2.5% this week‚ citing increased prices and ongoing supply chain disruptions. This follows an unexpected contraction of the U.S. economy in the first three month of 2022. The reason for this was a decrease in inventories and trade imbalance. The outlook for America's economy is being dimmed by international turmoil. This includes the possibility of recession in Europe or China. A stronger dollar‚ which makes dollar investment more appealing due to rate rises‚ could reduce exports and increase the likelihood of an economic recession where the economy contract for at least two quarters consecutively. Peloton and Netflix‚ two high-flying tech companies‚ have announced layoffs recently due to fears of a weak economy. Twitter and Meta both have stopped hiring‚ but Amazon executives stated recently that the company is overstaffed following months of rapid hiring. The national unemployment insurance claims rose to 218‚000 in the last week. This is a 4 month high‚ but still very low. Inflation‚ at 40-years highs‚ is a major problem for the economy as well as the Biden administration. Americans are seeing the economy as a challenge because of higher prices for basic necessities like housing‚ food and energy. This week saw gas prices rise to an all-time high‚ reaching $4.57 per gallon in the US. The University of Michigan has been closely monitoring consumer sentiment and found that Americans' views of future finances have declined sharply over the last year. Americans still spend despite the grim outlook. According to Commerce Department data‚ April saw an increase of 0.9% in retail sales compared to the previous month. The U.S. economy appears to be doing well in the near term‚ despite problems abroad and high checkout prices. Beth Ann Bovino is the chief U.S. economist at S P Global. She says that there's an 35% chance of recession within the next year. Businesses are hiring‚ people are spending. There are certain challenges ahead. While the Fed's actions may slow down the economy‚ the real question is whether or not they can also overthrow the apple tree. Janet L. Yellen‚ Treasury Secretary to Janet L.‚ said that she was optimistic that the central bank can contain inflation without causing a crisis. This comes a day after warnings about slower growth and higher inflation. However‚ she admitted that it was not possible to control inflation without causing a recession. It is possible that there might be a soft landing. This requires skill as well as luck. It is a good thing‚ I believe. However‚ this economic environment can be very challenging‚ Yellen said to reporters in Germany. She cited economic shocks caused by the sanctions and war on Russia. It's complicated. There are many things going on. Although the United States may avoid a recession for the near-term‚ economists warn that the rapid pace of inflation (with prices rising 8.3% over the last year) and persistent supply/demand imbalances due to the pandemic and policy responses could lead to a more serious crisis. According to Jason Furman (an economics professor at Harvard University and an advisor during the Obama administration)‚ consumers are spending like mad‚ businesses will need to rebuild inventories‚ while a lot more workers are returning to the labour market. All of this worries me about in two to three years. It might be that the Fed raises rates further‚ which could lead to a bigger recession. Moodys' Zandi said that rising gas prices and commodities from supply chain snarls related to pandemics as well as the Ukraine war are contributing factors to an economic downturn.

recession u s economy the fed federal reserve goldman sachs consumer spending inflation more experts believe that the could be heading towards next year

The odds of an American recession within the next 24 hours are now at 50% He said that we were very near the edge. Housing market will be the next to collapse; it's up to us to figure out how. In April‚ new home construction declined due to a slower pace in single-family homes. According to Census Bureau and Department of Housing and Urban Development data‚ building permits offer an insight into the future of construction. Yelena Maeyev from Grant Thornton said that home builder sentiment dropped to its lowest point in 2 years in May. This was according to an analyst note. As we approach the home-buying season‚ builders are expecting less foot traffic. This softening has already begun to ripple through the economy. Due to dwindling home loan and refinance demand‚ major mortgage lenders in the US‚ such as Wells Fargo‚ and others‚ have fired thousands of employees. Kevin Retcher‚ a mortgage lender in Alexandria‚ Va. said that potential buyers are becoming more cautious. Late last year saw a drop in mortgage rates‚ as the Fed signaled that future rate increases were imminent. He said that buyers have been discouraged by rising mortgage rates (now at 5.3% per month for a 30-year fixed rate mortgage)‚ and skyrocketing home prices in the months following. He said that at least three of his clients had pulled out from ratified contracts within the past two weeks. Retcher of First Meridian Mortgage said that there is a lot of anxiety out there. Although it is rare for people to win contracts‚ they have been doing this. Others small business owners say that they are also seeing an increase in customer demand as their customers struggle with rising prices. Aaron Mulherin of a Marion glass repair business said that although homeowners continue to spend on necessities such as fixing their windows‚ many are starting to reconsider spending on luxury items like custom-made showers. Mulherin stated that middle-class‚ average consumers have begun to be cautious. They are getting estimates and then delaying the purchase. - - - This report was contributed by Jeff Stein‚ Washington Post. Related Content. Marcus Flowers raised millions and has spent them against Marjorie Taylor Greene Iowa's rural county that supported Trump now wants Latinos to help him grow. She lost her sister at Oxford High. She is determined to stop the school from moving on.