Posted on 02/16/2024 8:18:26 AM PST by SeekAndFind
NEW YORK (AP) — As some of the world’s biggest economies stumble into recession, the United States keeps chugging along.
Both Japan and the United Kingdom said Thursday their economies likely weakened during the final three months of 2023. For each, it would be the second straight quarter that’s happened, which fits one lay definition for a recession.
Yet in the United States, the economy motored ahead in last year’s fourth quarter for a sixth straight quarter of growth. It’s blown past many predictions coming into last year that a recession seemed inevitable because of high interest rates meant to slow the economy and inflation.
Give much of the credit to U.S. households, who have continued to spend at a solid rate despite many challenges. Their spending makes up the majority of the U.S. economy. Government stimulus helped households weather the initial stages of the pandemic and a jump in inflation, and now pay raises are helping them catch up to high prices for the goods and services they need.
On Thursday, a report showed that fewer U.S. workers filed for unemployment benefits last week. It’s the latest signal of a remarkably solid job market, even though a litany of layoff announcements has grabbed attention recently. Continued strength there should help prop up the economy.
Of course, risks still loom, and economists say a recession can’t be ruled out. Inflation could reaccelerate. Worries about heavy borrowing by the U.S. government could upset financial markets, ultimately making loans to buy cars and other things more expensive. Growing losses tied to commercial real estate could mean big pain for the financial system.
But, for now, the outlook continues to appear better for the United States than many other big economies. The mood on Wall Street is so positive that the main measure of the U.S. stock market, the S&P 500 index, topped the 5,000 level last week for the first time.
“First and foremost, it’s important to emphasize that the market’s performance is more a reflection of a thriving economy rather than unwarranted ‘animal spirits’ from investors,” according to Solita Marcelli, chief investment officer, Americas, at UBS Global Wealth Management.
When it upgraded its forecast for global growth in 2024 a couple weeks ago, the International Monetary Fund cited greater-than-expected resilience in the U.S. economy as a major reason.
Several unique characteristics of the U.S. economy have sheltered it from recessionary storms, analysts say. The U.S. government provided about $5 trillion in pandemic aid in 2020-2021, far more than overseas counterparts, which left most households in much better financial shape and supported consumer spending well into 2023.
The Biden administration has also subsidized more construction of manufacturing plants and infrastructure through additional legislation passed in 2021 and 2022 that was still having an impact last year. About one quarter of the U.S. economy’s solid 2.5% growth in 2023 was made up of government spending. Republican critics, however, charge that the extended spending contributed to higher inflation.
“We had some policies that I do think helped us a lot,” said Diane Swonk, chief economist at KPMG. “But also the structure of our economy is so much different.”
Americans have been better protected from rising rates than U.K. counterparts, for example, because most U.S. homeowners with mortgages have long, 30-year fixed rates. As a result, the Federal Reserve’s rapid rate hikes of the past two years -- which have lifted mortgage rates from around 3% to about 6.7% -- have had little effect on many U.S. homeowners.
Yet their British counterparts carry mortgages that have to be renewed every two to five years. They've struggled with rapidly rising mortgage rates as the Bank of England has lifted borrowing costs to combat inflation.
Catherine Mann, a member of the Bank of England's interest-rate setting committee, said Thursday that the U.K. economy's slowdown should be temporary. There are already signs in business surveys that the economy is picking back up, she added.
“The data we have today is rear-view mirror,” she said on the sidelines of an economic conference in Washington. Forward-looking reports “are all looking good.” Like the Fed, the Bank of England is considering reducing its benchmark rate once it is confident inflation is under control.
Another benefit for the United States is that it experienced a surge in immigration in recent years, which has made it easier for businesses to fill jobs, potentially expand their operations, and has led to more people earning wages -- and then spending those earnings.
Japan, by contrast, is rapidly aging and has seen its population shrink for years, as it is less open to foreign labor. A declining population can act as a powerful drag on economic growth.
In Europe, consumer sentiment is weak among consumers who are still feeling the effects of higher energy prices caused by the war in Ukraine.
Even China, whose economy is growing faster than the United States’, is under heavy pressure. Its stock markets have been among the world’s worst recently due to worries about a sluggish economic recovery and troubles in the property sector.
The U.S. economy faces its own challenges. Its growth is forecast to cool this year as big hikes to interest rates by the Federal Reserve make their way fully through the system.
A report on Thursday may have given a nod to that. Sales at U.S. retailers slumped by more in January from December than economists expected.
Some pillars of support for consumer spending may be weakening. Student loan repayments have resumed, consumers have largely spent their pandemic stimulus money and credit-card balances are high.
Perhaps most frustrating is the fact that prices for things at the market are still much higher than they were before the pandemic. Lower inflation means prices are rising less quickly from here, not that they're falling back to where they used to be.
Coping with inflation remains U.S. consumers’ top concern, except for those making more than $150,000, according to a recent survey by Morgan Stanley.
When McDonald’s CEO Chris Kempczinski discussed his company’s latest quarterly results, he said he’s not seeing much change in behavior among middle- and upper-income customers. But “where you see the pressure with the US consumer is that low-income consumer, so call it $45,000 and under. That consumer is pressured.”
that was my first thought
on a positive note
inflation is only hurting people who eat
all others are doing fine
“Recession has struck some of the world’s top economies. Yet, The US keeps defying expectations..”
Biden is working on it.
RE: Biden is working on it.
Biden isn’t even working. He’s just a placeholder who signs and approves anything given to him by WHOEVER IS REALLY IN CHARGE.
If Trump’s not elected Biden’s chickens will come home to roost and our economy will fail.
Maybe so. Big I do remember a lot of scare tactics about the debt for decades. I know that some countries may eventually change currency, but currently there is no alternative.
And those mentally disturbed generations who hate their parents are fully as to blame, as they expect everything to come to them as well.
It is hard to find anything to disagree with greatly on this thread. Especially with the Freeper who stated: “Capitalism didn’t fail; it was murdered.”
Murdered by Government and Cronies.
Ya ... don't get me wrong , I'm not celebrating the artificial “prosperity” bought with or childrens sweat...
but more commenting on the times we live in ...
not every one gets to live during the destruction of civilization.
good times ....
Nations have always ascended to the top as a result of being victors of war, and our leaders have been fomenting friction around the globe to enrich themselves off of the military-industrial complex.
Perhaps you took them as scare tactics, but those were the honest politicians warning the people that we cannot continue to deficit spend into wealth. Even nations must live within their means.
But gimmicks were employed which for a while gave the impression of wealth, but it was a structure built upon a house of cards that was doomed to collapse at some point in time. It would have happened a lot sooner had we not had our dollar as the world's reserve currency. That luxury afforded & enabled them just just keep kicking the can down the road. Well, they are running out of road & gimmicks as well.
Putin was correct when he said that it's the US dollar that provides the US with its power. As that continues to decline, do you not think someone will challenge the US militarily? It's not like we have had a real stellar success story. We now have a leader that is not only corrupt, but is also extremely weak. No wonder Putin prefers Biden over Trump.
Batten down the hatches, t's only going to get much worse if we fail to get Trump back into office. Who will follow then becomes the next concern. I think our days are numbered, unless we can also bring back the Lord as well, & reverse the terrible decisions that have been made over the last 80 years since our victory in WWII.
Every American should stand proud and sing it loudly and with joy:
We have the best liars in the world!
China will follow Sun Tzu tactics—patiently bide their time.
There is no rush for them—years, decades, even a century—but they will strike.
The U.S. economy is being artifcially boosted by money the country does not have, money the country is printing with Biden’s many trillions in new Federal borrowing. It is inevitable that any successor to Biden will have to trim that borrowing and will become someone many folks will blame when/if GDP growth slows as that massive spending and borrowing is trimmed.
They really don’t need to invade, but they will infiltrate and slowly take this nation over. In fact, they are well along that route now. They are actually invading this nation as we speak.
They are saving the recession-Depression for Trump so his VP will not be able to run. They hope to make Trump into Herbert Hoover for a twelve year Democrat-Progressive—neo-communist one party rule like they had with FDR/Truman. Not to be.
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