Former Treasury economist David Beckworth says there are a number of signs the US economy is slowing in “Morning with Maria”.
The vast majority of economists expect the economy to collapse into a recession next year as a result of the Federal Reserve’s war on inflation, according to a new survey.
Findings from the National Association for Business Economics (NABE) show that 72% of economists expect a recession by the middle of next year — or believe the economy is already in.
About 20% of respondents said they believe that The economy is already in recession. Another 20% do not expect the decline to begin before the second half of next year.
“The survey results reflect many of the divided opinions among speakers,” NABE President David Altige said in a statement. “That in and of itself suggests that there is less clarity than usual about the outlook.”
Is the United States entering a recession?
Gas prices were listed at a gas station in Los Angeles, California, on July 19, 2022. (Frederick J. Brown av via Getty Images/Getty Images)
The survey, which was conducted between August 1 and August 9, included 198 NABE members.
There is a growing consensus on Wall Street The Fed will cause a recession while fighting inflation with a series of sharp interest rate increases. Policymakers approved a second consecutive rate hike of 75 basis points in July, and indicated that another rate hike is on the table in September, depending on upcoming economic data.
Gross domestic product, the broadest measure of goods and services produced in the country, has fallen for two consecutive quarters, with the economy contracting 1.6% from January to March and declining another 0.9% in the April-June period.
Recessions are technically defined by two consecutive quarters of negative economic growth and are characterized by high unemployment, low or negative GDP growth, low incomes and slow retail sales, according to the National Bureau of Economic Research (NBER), which tracks downturns.
The decline in economic growth in the second quarter meets the technical, but unofficial, criteria for a recession, which requires “a significant decline in economic activity that spreads through the economy and lasts more than a few months.” However, the NBER – the semi-official verdict – may not confirm this immediately because it usually waits up to a year to be contacted.
NBER also emphasized that it relies more on data than GDP in determining whether there is a recession, such as unemployment and consumer spending, which remained strong in the first six months of the year. It also takes into account the depth of any downturn in economic activity.
There are conflicting signals about the health of the economy, fueling debate about the state of the economy: The number of Americans filing for unemployment benefits has gradually increased, companies have announced layoffs or hiring freezes, and the housing market has slumped.
Jerome Powell, Chairman of the US Federal Reserve, speaks during a press conference in Washington on May 4, 2022. (Al Drago/Bloomberg via Getty Images/Getty Images)
Meanwhile, the unemployment rate fell to an all-time low of 3.5% in July, and consumers are still spending heavily, despite severe inflation.
Economists remain divided over whether or not the economy is officially in recession, but they largely agree that avoiding deflation in the near future will be nearly impossible because the economy Federal Reserve It tries to control inflation by cooling consumer demand.
Higher interest rates tend to create higher rates for consumer and business loans, which slows the economy by forcing employers to cut back on spending. Mortgage rates have nearly doubled from a year ago, while some credit card issuers have raised their rates to 20%.
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Federal Reserve Chairman Jerome Powell He said tackling inflation remains the central bank’s number one priority, even if that means risking deflation – though he stressed last month that he didn’t think the The United States is currently in a recession.
“We think it is imperative that growth slows down,” Powell said in July. “We actually think we need a period of growth below the potential in order to create some slack so that the supply side can catch up.”
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