Xinhua News Agency, Washington, July 12 (International Watch) Growth prospects continue to deteriorate, and the US economy faces the risk of recession

  Xinhua News Agency reporter Xiong Maoling

  The International Monetary Fund released its latest forecast on the 12th, downgrading its 2022 U.S. economic growth forecast to 2.3%, arguing that it is increasingly challenging for the United States to avoid a recession.

This is the second time the agency has lowered its U.S. economic growth forecast within a month, underscoring the deterioration of the U.S. economic growth outlook.

Some economists believe that against the backdrop of persistently high inflation and accelerated rate hikes by the Federal Reserve, the U.S. economy frequently flashes "yellow lights" and recession is only a matter of time.

Recession coming early?

  The latest forecast released by the Federal Reserve Bank of Atlanta on the 8th shows that the US real gross domestic product (GDP) in the second quarter of this year will shrink by an annual rate of 1.2%.

Final revisions from the Commerce Department in late June showed a 1.6% decline in the first quarter of this year.

If the forecast comes true, it means the U.S. economy has fallen into a technical recession.

  Cathy Wood, founder and CEO of Ark Investments, said in an interview with the US Consumer News and Business Channel recently that she believes the US economy is in recession, and excessive inventory is a big problem. Never seen in my life.

  Desmond Rahman, an economist at the American Enterprise Institute, told Xinhua that the U.S. recession will come earlier.

The U.S. economy is likely to experience negative growth in the second quarter, and two consecutive quarters of negative growth meet the general definition of a recession.

  Rahman also said that, as an authoritative institution for judging the status of the U.S. economic recession, the National Institute of Economic Research usually takes several months to measure before giving a formal judgment, and may not rush to announce that the U.S. economy has fallen into recession in the short term.

The economy frequently flashes "yellow lights"

  Data released by the Institute for Supply Management earlier this month showed that against the backdrop of persistent supply chain bottlenecks and high inflation, the U.S. manufacturing purchasing managers’ index fell by 3.1 percentage points in June from May, indicating a slowdown in manufacturing growth.

Inventories are high in some industries and sales are falling.

  Personal consumption expenditures, which account for about 70 percent of the U.S. economy, are also showing risk signals.

U.S. personal consumption expenditures rose just 0.2% in May, a decline adjusted for inflation, Commerce Department data showed.

  The Wall Street Journal reported that Americans are facing the worst inflation in decades, while incomes have failed to keep pace with rising prices, affecting consumer spending.

  An analysis article by the Peterson Institute for International Economics, an American think tank, believes that the U.S. job market was relatively strong in June, but the labor force participation rate declined.

Outside the labor market, other worrisome economic data suggested the economy may be headed for a recession.

 Worries are generally rising

  Many economists believe that in the context of high inflation, it is only a matter of time before the Fed's more aggressive monetary policy pushes the U.S. economy into recession.

Federal Reserve Chairman Jerome Powell acknowledged in a congressional hearing in late June that there is a possibility of a recession in the U.S. economy and that a soft landing will be very challenging.

  The Fed has raised interest rates three times since March, raising the target range for the federal funds rate to between 1.5% and 1.75%.

At the monetary policy meeting in June, the Fed raised interest rates by 75 basis points, the largest single rate hike since 1994, and its urgency to control inflation is evident.

  Adam Posen, director of the Peterson Institute for International Economics, told Xinhua that if the interest rate level at the end of this round of interest rate hikes is raised from about 3% to more than 4%, it may bring about an economic recession.

  Deutsche Bank economists have predicted that the U.S. economy will begin to enter a recession in mid-2023, and the unemployment rate will peak at 5.4% in the fourth quarter of 2023.

According to a survey by the Financial Times, nearly 70% of economists surveyed believe that the U.S. economy will fall into recession next year.

According to a forecast released by Bloomberg Economics in mid-June, the probability of a recession in the U.S. economy by early 2024 is as high as 72%.

  Rahman told reporters that the probability of a recession in the U.S. economy is very high amid a slowdown in the economy, financial markets in distress, and a tough Fed policy stance.

Two-year and 10-year U.S. Treasury yields have inverted again, a very reliable forward-looking indicator of a recession.