This is fueling debate among policymakers and investors about whether the US is close to a recession or is already in a recession — and if not, could constant worrying about one of them be enough to make it a reality, with businesses and consumers starting to jitter. to undo.
“I don’t think we should be talking about a recession,” US Commerce Secretary Gina Raimondo said earlier this month.
Two camps began to form. The White House embodies one of them, assuring that while the US economy is slipping into a slowdown, it is not in a recession as we usually know it.
“I think there’s a high potential for a recession,” Summers said. “When we were in a situation like this before, basically stagnation always followed.”
His concerns lie in the uphill task the Federal Reserve faces. The central bank is rapidly tightening interest rates to stifle inflation, but it risks promoting a sharp decline in economic activity as it boosts borrowing costs.
And while the Fed hopes it can engineer a so-called “soft landing,” in which inflation falls without a recession, Summers is sceptical.
“When inflation is high and unemployment is low, an easy landing represents a kind of victory of hope over experience,” he said.
However, the recession call that economists and policymakers are watching comes from the Business Cycle Dating Committee of the National Bureau of Economic Research, which defines a recession as “a significant decline in economic activity that is spread throughout the economy and lasts more than a few months.”
“While some view two consecutive quarters of real GDP decline as a recession, this is neither the official definition nor the way economists assess the state of the business cycle,” the White House said in a recent blog.
Meanwhile, business leaders are increasingly concerned. The latest survey of business conditions from the National Association for Business Economics released Monday found that 43% of respondents think a recession in the next 12 months is more likely than others. Only 13% held this position in April.
Airlines are making money again despite the travel chaos
Traveling this summer is a nightmare, as long lines, delays and cancellations have turned the flying experience into a huge headache.
But even as costs rise and disruptions to service spread, airlines are making money again.
Demand rebounded strongly, with traffic exceeding pre-Covid levels, helping to offset a massive 560% increase in what Ryanair paid for fuel.
Ryanair said average fares are down 4% compared to the same quarter before Covid.
While bearing the brunt of frustration about the state of air travel, airlines are blaming airports and government officials. They say slow efforts to support staff have led to a shortage of workers resulting in long queues.
“They had one job to do and that was to make sure they had enough processors and security staff,” Ryanair chief financial officer Neil Sorahan said Monday in an interview. “They had schedules months in advance.”
Troubled Volkswagen CEO is out of work
“He is now the right person to lead the group and to further enhance customer focus and positioning for its brands and products,” Hans-Dieter Buch, chairman of the company’s supervisory board, said in a statement.
The big question: What does this mean for Volkswagen’s ambitions? UBS analysts note that under Diss, Volkswagen has been the fastest-moving car company focused on an “all-electric future, often compared to Tesla and other upheavals.”
Volkswagen said it will allocate 89 billion euros ($91 billion) over the next five years to develop electric vehicles, which is about half of planned spending during that period. It aims to have electric vehicles account for a quarter of sales by the end of 2026.
The UBS team expects the company to continue down the path, and sees a clear trend of travel in terms of customer demand. But investors do not like uncertainty. Shares fell in early trading on Monday.
They have shed 25% year-to-date, and are only up 10% since Diess was appointed CEO in 2018.
On the radar: The company’s luxury unit Porsche was on track to go public later this year on a much-anticipated list, though volatile markets pose a risk. The change in leadership adds to doubts about timing.