Top economic results as the US grapples with recession fears | Inflation news

Back-to-back GDP slowdowns, the Fed doubling, a cold job market, skyrocketing prices, and the tech big bang are the economic highlights from a busy week.

It was an eventful and data-packed week for the US economy.

The Federal Reserve, the country’s central bank, raised interest rates by 75 basis points on Wednesday, the second time in many meetings, in the hope that higher borrowing costs would help balance supply and demand. Thursday’s gross domestic product estimates indicated the US economy has contracted for two consecutive quarters, sparking fears that the country may be headed into a recession.

On Wall Street, some of the biggest names in the US industry, including Apple, Amazon, Microsoft and Alphabet, Google’s parent company, released better-than-expected earnings and forecasts, sending shares higher. Other data showed that the US labor market remains very tight despite companies announcing layoffs.

After printing trillions of dollars during the height of the pandemic to stimulate the economy and cushion the shock to businesses and families, annual inflation in the US is now at its highest level in 40 years and there are indications that Americans are feeling the pain. Consumer spending, which accounts for more than two-thirds of economic activity, may be slowing, and retailers are bracing for a pullback.

Here are the main economic developments from a busy week:

Walmart cut its second-quarter and full-year earnings forecast on Monday, asserting that higher food and gas prices are causing consumers to spend less on goods such as clothing that have larger profit margins. By Tuesday morning, Walmart’s shares were down nearly 9 percent, also dragging major chains like Target and Kohl’s down. The world’s largest retailer rarely lowers its earnings forecast mid-quarter, so retail watchers wondered whether the retail industry warning was a sign of things to come for the entire retail sector.

  • Consumer confidence waning

According to US statistics released on Tuesday, consumers are less secure about spending. The consumer confidence index fell for a third month to 95.7 from a downwardly revised 98.4 in June. This is the lowest reading since February 2021.

  • Fed doubles, says more increases depend on future data

The Federal Reserve raised interest rates by 75 basis points on Wednesday. The US central bank increased its efforts to combat the largest inflation in more than 40 years and stated that an “extraordinarily large increase may be appropriate” at its September meeting. That decision “will depend on the data we get every now and then,” Federal Reserve Chairman Jerome Powell told reporters, stressing that the central bank’s overall focus is to bring inflation back to our “2 percent target.” Since March, the Federal Reserve has raised interest rates by 225 basis points.

  • Higher Mortgages Mean Less Home Sales

The pandemic-era housing boom subsides quickly as higher mortgage rates make it more expensive to buy and keep up with mortgage payments. According to figures released on Wednesday, US pending home sales in June fell by the most since April 2020. “Early signs of the cooling effect are most evident in the housing market, a sector that has been hit hard by rising mortgage costs,” said Peter Essely, head of portfolio management at the Federal Reserve. Commonwealth Financial Network, a Massachusetts-based company, for the island.

  • Microsoft, Alphabet, Apple and Amazon are lifting sentiment on Wall Street

Also Wednesday, rosy expectations from Microsoft and Google parent Alphabet sparked a rally in high-growth stocks. Microsoft shares jumped after it expected double-digit revenue growth this fiscal year. Google’s parent company Alphabet rose in better-than-expected sales. By Friday, Apple and Amazon had joined the tech rally, adding about $175 billion to their combined market capitalization after upbeat results boosted investor confidence. Amazon shares jumped about 11 percent. Apple rose more than 3 percent as the tech giant said that despite customers’ tighter spending habits, demand for iPhones remained high.

  • The US economy is shrinking for the second consecutive quarter but don’t call it a recession

According to a preliminary estimate released by the US Department of Commerce on Thursday, gross domestic product declined at an annualized pace of 0.9 percent after declining 1.6 percent in the first three months of the year. Unofficially, a two-quarter drop in growth indicates that the economy is in recession. Despite the numbers, US President Joe Biden and administration officials have continued to say a recession is not imminent.

  • Employment slows but unemployment rate remains at 50-year low

The Labor Department showed Thursday that although fewer Americans filed for unemployment benefits for the first time in four weeks, the total was still the largest since November, raising the possibility of an economic slowdown. The unemployment rate is 3.6 percent, the lowest in nearly 50 years. The employment cost index released Friday revealed that a tight labor market helped boost wage growth, which led to a significant increase in US labor expenditures in the second quarter. Labor costs rose 5.1 percent year on year, the largest rise since the current series began in 2001. Several companies have recently announced their intention to reduce their workforce. E-commerce company Shopify said this week that it will lay off 10 percent of its workers. Apple, Alphabet and Microsoft have also reported that the hiring process is slowing.

  • Despite the increases, higher prices are taking a toll on Americans’ salaries

The Commerce Department said Friday that consumer prices jumped 6.8 percent in June from a year earlier — the highest annual increase since 1982. The personal consumption expenditures price index, which the Federal Reserve is monitoring to determine if it’s meeting its inflation target, rose 2 percent. cent, up 1 percent from the previous month. Data on Friday also revealed that consumer spending rose 1.1 percent in June, driven by higher cost of living. Americans spent more on both health care and cars. With prices rising, the inflation adjustment indicates that consumer spending recovered only slightly in June – by 0.1 percent.

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