The Limited Times

Now you can see non-English news...

The US economy slowed sharply to an annual pace of 1.1%

2023-04-27T13:13:47.139Z


GDP weakened after growing 3.2% from July to September and 2.6% from October to November. Eyes point to rate hikes.


The

US economy

 slowed sharply from January to March, at an annual pace of just 1.1%, as higher interest rates hit the housing market and businesses reduced inventories.

Thursday's estimate from the Commerce Department showed the nation's GDP, the broadest gauge of economic output, weakening after growing 3.2% from July to September and 2.6% from October to November.

But consumer spending, which accounts for about 70% of US economic activity,

remained resilient

, growing at an annual rate of 3.7%, the fastest quarterly pace in nearly two years.

The slowdown reflects the impact of

the Federal Reserve's aggressive push

to rein in inflation, with

nine interest rate hikes

over the past year.

Consumer spending, which accounts for about 70% of US economic activity, remained resilient.

Photo: Patrick T. Fallon / AFP

Rising borrowing costs are expected

to push the economy into a recession

sometime this year.

Although inflation has steadily declined from a four-decade high reached last year, it remains well above the

Fed's 2% target.

The housing market


The housing market, which is especially vulnerable to higher loan rates, has taken a hit.

And many banks

have tightened their credit standards

since the bankruptcies of two major US banks last month, making it even more difficult to borrow to buy a house or car or expand a business.

Many economists say the cumulative impact of the Fed's rate hikes

has yet to be fully felt

.

However, central bank policymakers are aiming for a so-called soft landing: cooling growth enough to

curb inflation,

but not so much that it sends the world's largest economy into recession.

recession in 2024

There is

widespread skepticism

that the Fed will succeed.

An economic model used by the Conference Board, a business research group, puts the probability of a US recession over the next year at 99%.

The Conference Board's recession probability indicator hovered around zero from September 2020, when the economy recovered explosively from the COVID-19 recession, until March 2022, when the Fed began raising rates to combat the inflation.

Consumers, whose spending accounts for roughly 70% of US economic output, seem to be

starting to get cold feet

.

Retail sales had enjoyed a strong start in January, helped by warmer-than-expected weather and higher Social Security checks.

But in February and again in March, retail sales fell.

The worst fears of a

2008-style

financial crisis have been allayed over the past month.

But persistent credit crunching, which was mentioned in this month's Fed survey of regional economies, is likely to hamper growth.

Political risks are also growing.

Congressional Republicans are threatening to let the federal government default on its debts by refusing to raise the legal limit on how much you can borrow if Democrats and President Joe Biden don't agree to the restrictions and spending cuts.

The first federal debt default

would wreck the US Treasury bond market,

the world's largest, and possibly spark a

global financial crisis.

The

global context

also looks bleaker.

The International Monetary Fund this month lowered its global economic growth forecast, citing rising interest rates around the world, financial uncertainty and chronic inflation.

US exporters could suffer the consequences.

Associated Press

ap

look also

For the IMF, the global economy is "anemic" and will grow just 2.8% this year

"Let's finish the job": Joe Biden announced his candidacy for re-election in 2024

Source: clarin

All news articles on 2023-04-27

You may like

News/Politics 2024-01-31T13:39:00.048Z

Trends 24h

News/Politics 2024-03-28T06:04:53.137Z

Latest

© Communities 2019 - Privacy

The information on this site is from external sources that are not under our control.
The inclusion of any links does not necessarily imply a recommendation or endorse the views expressed within them.