Despite surging interest rates, punishing inflation and global turbulence, the U.S. economy stood firm last year. From employers to consumers, the picture was one of surprising resilience.
This year may be shaping up as a more downbeat story. The economy is widely expected to decelerate steadily and to slip into a recession sometime this year.
The obstacles the economy faces are growing more troublesome. The biggest among them is the dramatically higher cost of borrowing. The Federal Reserve, in its fight against an inflation rate that last year hit a four-decade high, has raised its benchmark rate nine times in just over a year. 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 U.S. recession over the next year at 99%.
Consumers, whose spending accounts for roughly 70% of U.S. economic output, seem to be starting to feel the chill. Retail sales had enjoyed a strong start in January, aided by warmer-than-expected weather and bigger Social Security checks. But in February and again in March, retail sales tumbled. The worst fears of a 2008-style financial crisis have eased over the past month. But lingering credit cutbacks, which were mentioned in the Fed’s survey this month of regional economies, is likely to hobble growth.
The global backdrop is looking bleaker, too. 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. American exporters could suffer as a consequence.
France Dernières Nouvelles, France Actualités
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