American exporters could suffer as a consequence. The International Monetary Fund this month downgraded its forecast for worldwide economic growth, citing rising interest rates around the world, financial uncertainty and chronic inflation. The global backdrop is also looking bleaker. Treasurys - the world’s biggest - and possibly cause a global financial crisis. A first-ever default on the federal debt would shatter the market for U.S. Congressional Republicans are threatening to let the federal government default on its debts, by refusing to raise the statutory limit on what it can borrow, if Democrats and President Joe Biden fail to agree to spending restrictions and cuts. But lingering credit cutbacks, which were mentioned in the Fed’s survey this month of regional economies, is likely to hobble growth. The worst fears of a 2008-style financial crisis have eased over the past month. The slowdown reflects the impact of the Federal Reserve’s aggressive drive to tame inflation. But in February and again in March, retail sales tumbled. Retail sales had enjoyed a strong start in January, aided by warmer-than-expected weather and bigger Social Security checks. economic output, seem to be starting to feel the chill. The Conference Board’s recession-probability gauge had hung around zero from September 2020, as the economy rebounded explosively from the COVID-19 recession, until March 2022, when the Fed started raising rates to fight inflation.Ĭonsumers, whose spending accounts for roughly 70% of U.S. An economic model used by the Conference Board, a business research group, puts the probability of a U.S. There is widespread skepticism that the Fed will succeed. Yet the central bank’s policymakers are aiming for a so-called soft landing: Cooling growth enough to curb inflation yet not so much as to send the world’s largest economy tumbling into a recession. Many economists say the cumulative impact of the Fed’s rate hikes has yet to be fully felt. banks, making it even harder to borrow to buy a house or a car or to expand a business. And many banks have tightened their lending standards since the failure last month of two major U.S. The housing market, which is especially vulnerable to higher loan rates, has been battered. Though inflation has steadily eased from the four-decade high it reached last year, it remains far above the Fed’s 2% target. The surge in borrowing costs is expected to send the economy into a recession sometime this year. The slowdown reflects the impact of the Federal Reserve’s aggressive drive to tame inflation, with nine interest rate hikes over the past year. economic activity, remained resilient, growing at a 3.7% annual pace, the fastest quarterly pace in nearly two years. Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product - the broadest gauge of economic output - weakened after growing 3.2% from July through September and 2.6% from October through November.īut consumer spending, which accounts for about 70% of U.S. economy slowed sharply from January through March, decelerating to just a 1.1% annual pace as higher interest rates hammered the housing market and businesses reduced inventories. US economy grew a healthy 3.2% in Q3, up from earlier estimate US economy slows, but still grew 2.9% last quarter SVB turmoil leads Goldman Sachs, JPMorgan to raise recession probabilityĮconomy grew less than estimated in Q4 as consumer spending slowed
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