Report: U.S. Economy Slowing, Could Face Recession by End of Year
Shafaq News/ The U.S. economy is facing increasing weakness that could bring a recession before the end of the year, the Conference Board warned on Thursday.
The business organization’s forward-looking index of leading indicators fell by 0.4% in July on top of a 0.7% drop in June and has now declined for five consecutive months.
“The US LEI declined for a fifth consecutive month in July, suggesting recession risks are rising in the near term,” said Ataman Ozyildirim, senior director, economics at the board.
“Consumer pessimism and equity market volatility as well as slowing labor markets, housing construction, and manufacturing new orders suggest that economic weakness will intensify and spread more broadly throughout the US economy,” he added. “The Conference Board projects the US economy will not expand in the third quarter and could tip into a short but mild recession by the end of the year or early 2023.”
The index foreshadows developments in the economy by about seven months on average.
The reading is in line with other economic data that shows the economy is in a slow growth mode. Claims for unemployment benefits have risen by about 50,000 a week from their levels of earlier this year. Retail sales, while nominally growing, are being affected by the effects of inflation. The price of oil has slumped on reduced demand, though that is a net positive in the Federal Reserve’s fight against inflation.
Housing, meanwhile, has slowed measurably. The National Association of Realtors said Thursday that sales of existing homes fell 5.9% in July, following a 5.4% drop in June. Sales are now down 20% from a year ago. New home construction, meanwhile, is slumping as construction costs rise and mortgage rates have nearly doubled from a year ago.
"The ongoing sales decline reflects the impact of the mortgage rate peak of 6% in early June," said NAR Chief Economist Lawrence Yun. "Home sales may soon stabilize since mortgage rates have fallen to near 5%, thereby giving an additional boost of purchasing power to home buyers."
The price of a median home fell $10,000 in July to $403,800.
“Many home shoppers were staggered by mortgage rates which climbed 70 basis points in just three weeks, peaking in the second half of June, roughly when July home closings would likely have gone under contract,” Danielle Hale, chief economist for Realtor.com, said in advance of the report.
“Fortunately, mortgage rates have since eased from those peaks, but shoppers who saw the mortgage rate landscape shift so suddenly are likely to remember the experience and have one more reason to hold back on offering top dollar.”
Source: US News
