There is a question that persistently floats in the United States, recession or no recession? The data continues to give play to both sides, although those who see it as something far away maintain the majority in the polls.
The US economy grew 1.1% in the first quarter of 2023, data that allows us to point out that it is the third consecutive period of growth, but also to emphasize that it is below forecasts, which were 1.9%-2 %, and that is a significant setback compared to the 2.6% of the last quarter of last year.
This GDP result, which analyzes the goods and services produced during that period, shows that the resilience of consumption faces high inflation, above 5%, and the increases in interest rates imposed for more than a year by the Federal Reserve (Fed), located today already at 5%.
Consumer spending, the main driver of growth, and hiring in the labor market surprised by their strength at the start of the year. However, the Fed’s continued efforts to increase the price of money to offset high prices is starting to cool the economy. But the sustained growth, despite the cooling, still scares away the specter of recession, at least for now.
Consumers cut their spending in February and March, although they continued to draw on their portfolios at a good pace, while the housing market and the manufacturing industry fell in the first quarter of 2023 and became the main elements of the slowdown. In turn, companies added fewer employees and wages went down.
The Commerce Department report also includes that the personal consumption expenditures price index, an element closely watched by the Fed, increased by 4.2%, a percentage well above the estimate of 3.7%.
High inflation and a decline in GDP growth are often described as “stagflation†or stagnation, a situation that characterized the US economy in the late 1970s and early 1980s.
The stock indices reacted with an upward rally at the opening of the session. Treasuries also rose.
The GDP data shows that the US economy continues to expand, but analysts do not hide their concern about the path they see on the horizon. The banking system exhibited signs of a bumpy road last March after the necessary intervention by the management of Silicon Valley Bank and Signature.
It is not yet clear what the impact of the collapse of these two entities will be on the financial system and the US economy. Fears have been reinforced by the problems of First Republic Bank, whose shares have fallen 50% of their value after learning that customers have withdrawn more than 102,000 million deposits, more than half of what the entity held .
Before the appearance of the growth data, a majority of experts maintained that they did not foresee a recession throughout this year, in a twist on previous surveys. Opinions, however, are marked by volatility.
