The U.S. economy is likely to face a recession by the end of the year as growth continues to slow, report says

The US economy has cooled significantly and is likely to slip into recession by the end of the year, the Conference Board warned this week.

The nonprofit business organization on Thursday said the main economic index, which tracks 10 indicators designed to measure the health of the economy, fell 0.4% in July, on top of a 0.7% drop in June. Stated.

Ataman Ozildirim, senior director of economics at The Conference Board, said the index had fallen for the fifth month in a row, “suggesting a rising risk of a recession in the near term.”

“Consumer pessimism and stock market volatility, along with a slowing labor market, housing construction and new manufacturing orders, suggest the economic downturn will intensify and spread broadly across the U.S. economy,” Ozildirim said. ‘ said. “The Conference Board predicts that the U.S. economy will not expand in the third quarter and could enter a brief but mild recession by the end of the year or early 2023.

Is the U.S. Going into a Recession?

gas station far away

Gasoline prices displayed at a gas station in Los Angeles on July 19, 2022. (FREDERIC J. BROWN/AFP via Getty Images/Getty Images)

The index brings economic development forward by about seven months.

Gross domestic product (GDP), the broadest measure of domestically produced goods and services, also fell for the second straight quarter, with the economy contracting by 1.6% from January to March and a further 0.9% from April to June. scaled down. .

According to the National Bureau of Economic Research (NBER), which tracks recessions, a recession is technically defined by two consecutive quarters of negative economic growth, characterized by high unemployment, low or negative GDP growth, declining incomes, Characterized by a slowdown in retail sales.

The slowdown in economic growth in the second quarter meets the technical but unofficial criteria for a recession that requires “a significant decline in economic activity that spreads across the economy and lasts for more than a few months.” Still, a semi-official arbitrator, the NBER may not approve it right away, as it typically takes up to a year to make a decision.

The NBER has also stressed that it relies on more data than GDP in determining whether there is a recession, such as unemployment and consumer spending, and the first six months of the year It remained strong. It also takes into account the depth of the downturn in economic activity.

federal reserve

The Fed approved a second rate hike of 75 basis points in July. This is three times the normal amount. (Aldrago/Bloomberg via Getty Images/Getty Images)

There are conflicting signs about the health of the economy, and the debate over the health of the economy is heating up. The number of Americans filing for unemployment benefits is slowly rising, companies are announcing layoffs and hiring freezes, and the housing market is softening.

At the same time, the unemployment rate fell to a near-historical low of 3.5% in July, and consumers are still spending heavily despite blistering inflation.

While economists are divided on whether the economy is officially in recession, they generally agree that avoiding a recession in the near future is nearly impossible. federal reserve It tries to keep inflation in check by cooling consumer demand. Policymakers approved his second rate hike of 75 basis points in July (three times his normal), and another super-large one in September, depending on upcoming economic data. It suggests that a rate hike is being considered.

Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending and slowing the economy. Mortgage interest rates have nearly doubled since a year ago, and some credit card issuers are raising interest rates to 20%.

Fed Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell speaks at a news conference in Washington on July 27, 2022. (AFP/Getty Images via Mandel NGAN/Getty Images)

Federal Reserve Board Jerome Powell Tackling inflation remains the central bank’s top priority, even if it means risking a recession. The US is currently in recession.


“I think we need to slow growth,” Powell said in July. I have.”

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