It is expected to grow US economy But at a slower pace in the final months of 2022, helped by consumption and business investment despite looming recession fears. Economic activity has been declining, with the US central bank raising its benchmark lending rate seven times last year, hoping to cool demand and curb costs as High inflation.
The real estate sector witnessed a decline, followed by declines in manufacturing and retail sales. Against this backdrop, the world’s largest economy is expected to expand 2.6% in the October-December period, according to analyst consensus forecasts, down from 3.2% in the third quarter of last year. This would mark the second consecutive quarter of growth following two rounds of contraction.
But the housing sector is likely to be a hindrance, as rates remain Mortgage High and affect affordability.
Recession risks?
While unexpectedly resilient consumer spending has supported growth, there are signs that households are drawing down savings from the pandemic period. Analysts say this might point to more weak spending in the future.
“Recent economic data suggests that the economy entered 2023 on a weak footing,” said Ryan Sweet of Oxford Economics. The United States is expected to enter a period of recession in the second quarter, as consumers reduce their spending and companies become more reluctant to hire and invest, but others believe that the country may avoid economic downturn.
Rubella Farooqui of High Frequency Economics said household balance sheets along with a strong job market might keep things positive this year. “We are still seeing an increase in wages that is much higher than the previous trend of the pandemic… We are not seeing an increase in unemployment claims,” she told AFP. “Companies are very reluctant to let go of workers, because they have suffered a lot in terms of employment,” she added.
She added that despite the layoffs announced by major companies, the fact that claims are not going up “means that a lot of these people are finding jobs”. Matt Collier, economist at Moody’s Analytics, added that consumers’ excess savings acted as a “firewall”.
He said that even if households were eating their money out of inflation, “it’s coming from a very high point,” and that would mitigate or prevent a prolonged deflation.
“incoming” layoffs
Meanwhile, Collier added, it seems hard to imagine large-scale layoffs right now.
Despite job losses in the technology sector, retail giant Wal-Mart, the largest private employer in the United States, said on Tuesday it was raising the minimum wage, a sign of the continuing tightening in the labor market.
He continued, “The issue of labor supply keeps people employed, and it is reasonable that the softness that we see remains relatively contained.”
Looking ahead, Fed Vice Chair Lyle Brainard warned that the burden on growth and employment from monetary policy is likely to pick up in 2023 given that policy changes take time to permeate the economy.
“However, there is uncertainty regarding timing and scale,” she added in a speech last week.
It said that moderation in demand might still allow for an easing of the labor market and lower inflation “without significant job losses”.
(AFP, The New Arab)
