(Financial World) Recession warnings continue, will the U.S. economy "slip"?
China News Agency, Beijing, October 20th, Question: With constant recession warnings, will the U.S. economy "slip"?
Author Liu Wenwen Zhang Wenhui
On October 19, local time, the Federal Reserve released the National Economic Situation Survey (Beige Book), saying that the current net growth of economic activities in the United States expanded slightly, but the price level is still high, and the American people are increasingly worried about weak demand and economic recession. , that the economic outlook has become more pessimistic.
For a long time, in response to soaring inflation, the Federal Reserve has continued to raise interest rates aggressively, leading to ever-increasing expectations of a U.S. economic recession.
Recession warnings continue, will the U.S. economy "slip"?
Recession alarm sounded
In response to the future prospects of the US economy, many parties gave a "recession" warning.
A few days ago, the results of the model deduction released by Bloomberg economists showed that the probability of a recession in the United States in the next 12 months is 100%, that is, a recession is inevitable.
In the last forecast, the probability was still 65%.
Fitch, an international rating agency, recently warned that the U.S. economy is likely to fall into a mild recession from next spring, and the agency also lowered its forecast for U.S. economic growth next year to 0.5% from the previous 1.5%.
JPMorgan Chase CEO Jamie Dimon said the U.S. economy could slip into a recession in six to nine months, and the situation is grim.
The International Monetary Fund (IMF) predicted a "deceleration" of the U.S. economy, and its latest report sharply lowered its forecast for U.S. economic growth this year by 0.7 percentage points to 1.6 percent.
In addition to a number of institutions that are not optimistic about the U.S. economy, the American people also lack confidence in the country's prospects.
According to foreign media reports, a new poll shows that 71% of the American public believe that the country’s prospects are bleak and the future is in a “dangerous situation.”
Inflation outlook remains gloomy
At the same time, the US inflation outlook is still not optimistic, and the data has exceeded expectations again.
According to data released by the U.S. Bureau of Labor Statistics recently, the U.S. consumer price index (CPI) rose by 8.2% year-on-year in September, higher than the expected 8.1%; the highest level.
Zhang Yu, assistant director and chief macro analyst at Huachuang Securities Research Institute, said that the U.S. inflation data in September exceeded expectations again, which once again greatly weakened the market’s optimistic expectations for a downturn in U.S. inflation, reflecting the resilience and repetitiveness of U.S. inflation.
This is also confirmed in the Fed's Beige Book.
The Beige Book pointed out that although some parts of the United States reported a slowdown in price increases, inflationary pressures remained high.
According to the Federal Reserve's Beige Book, Americans are increasingly worried about weaker demand, and companies are hesitant to increase employment.
Some businesses say rising inflation and the rising cost of living are pushing up wages, in addition to upward pressure on wages from a tighter labor market.
Li Xunlei, chief economist of Zhongtai Securities, pointed out that considering the "rigid" characteristics of U.S. wage increases, the current round of U.S. inflation will slow down significantly compared with previous cycles. The rate of decline will be more twists and turns than in previous historical cycles.
There is no way to "avoid the heavy" and there is nowhere to "the light"
For a long time, the United States has been torn between "curing inflation" or "curing recession".
Li Xunlei said that with the continuous rise of real interest rates, the current spending activities that are sensitive to interest rates such as real estate and corporate fixed investment in the United States have begun to weaken.
If the Federal Reserve continues to raise interest rates sharply, most economic investment activities will be more constrained, thereby exacerbating recession expectations.
Yang Chang, head of the policy group and chief analyst of the China-Thailand Securities Research Institute, told China News Agency that Fed Chairman Powell once stated that "in order to control inflation, even a certain amount of employment and the economy can be sacrificed". It is doubtful whether the U.S. economy will have a soft landing.
In the face of successive recession warnings, US President Biden believes that even if there is an economic recession, it will be a very "mild" recession.
Bai Ming, deputy director of the International Market Research Institute of the Institute of International Trade and Economic Cooperation of the Ministry of Commerce, told China News Agency that Biden's "slight" theory of the recession is reminiscent of the previous Fed's "temporary" theory of inflation forecasts.
But in fact, whether it is the Fed's "temporary" theory of inflation forecasts or Biden's "slight" theory of economic recession, they are avoiding the most important things, and they are all "selective blindness" to super liquidity.
Avoiding the heavy is not a good way to solve the problem. The current inflation situation and economic capacity make the United States neither "avoiding" nor "taking light" anywhere.
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