United States: the specter of recession


L’Shares of US retail giant Target plunged 38% in one month on the New York Stock Exchange. Investors are worried about the consequences of inflation, which has reached record levels in the United States for forty years (8.3% in April), on household consumption and, consequently, on the future profits of the business.

Faced with soaring prices that weigh heavily on their purchasing power, Americans have begun to change their behavior, by giving up certain expenses, for example televisions whose sales are falling sharply, or even by favoring the least expensive brands. and entry-level products. “We did not anticipate the rapid changes we have seen over the past sixty days,” said Target CEO Brian Cornell.

READ ALSOIn the United States, the damage of inflation

This very negative impact of inflation on consumption, which accounts for two-thirds of GDP in the United States, raises fears of an entry of the American economy into recession. In a column published on the Telos site, former Treasury Secretary Lawrence Summers even considers this scenario almost inevitable. Drawing on historical data going back to 1955, he observes that ” there has never been a quarter with average inflation above 4% and an unemployment rate below 5% that has not been followed by a recession in the following two years”.

According to him, the US Federal Reserve has taken of delay in its fight against inflation and will therefore have to adopt in the coming months a monetary response “much more energetic than currently expected”, that is to say raising its key interest rates much more quickly and to a much higher level than what is currently expected. Under these conditions, believes Lawrence Summers, IThe Fed is unlikely to achieve a soft landing for the economy.


The editorial staff advises you

Leave a Comment