Is the specter of a recession in the United States receding? In the first quarter of 2023, US GDP growth reached 2% annualized, according to the Commerce Department. Published this Thursday, June 29, this figure marks a very strong increase.
Recession or no recession? The United States in expectation
In the previous estimate, published at the end of May, growth over the same period was announced at an annualized 1.3%, and even 1.1% in the preliminary estimate. This new estimate also exceeds market expectations, which still envisaged growth at 1.3%, according to the consensus published by briefing.com.
« The updated estimate mainly reflects an upward revision to exports and consumer spending, despite lower non-residential investment and federal government spending “, detailed the ministry in its press release.
Another positive effect on growth, imports have also been revised downwards. Using the same method of calculation as other advanced economies, which simply compare to the previous quarter, growth is also revised sharply upwards, to 0.7% for the first three months of the year against 0.3% for the previous estimate, slightly higher than the rate observed in the last quarter of 2022 (+0.6%).
« Even though the economy beat expectations “on the first quarter, ” we expect the effects of the Fed’s restrictive policy to slow the pace of activity going forward and bring it below potential growth “, nuanced in a note the chief economist of HFE, Rubeela Farooqi.
A break in interest rate hikes…
On Wednesday, its boss, Jerome Powell, left the door open for two more consecutive rate hikes from the US central bank in the coming months, at a conference of central bankers in Sintra, Portugal on Wednesday.
As a reminder, the Fed’s last meeting ended with a pause, after a series of ten consecutive hikes to bring its main rate to a range between 5% and 5.25%, with the aim of allowing more time its monetary policy committee (FOMC) to see the effects of the increases already made on inflation, which remains above the 2% target. Although falling, inflation in the United States remained at 4% in May, according to the CPI index. That calculated according to the PCE index, favored by the Fed, should be known on Friday.
However ” we are far from a return to normal “, insisted the chairman of the Fed, “ we do not expect core inflation (i.e. excluding food and energy prices, editor’s note) to return to below 2% this year or next year, rather for the next ».
… but temporary
During the last meeting in mid-June, the majority of FOMC members felt that rates should be raised twice more, said Jerome Powell. ” We believe there will be further tightening of monetary policy, underlined the chairman of the Fed. He indicated that it has not been decided whether these increases will be realized during the next two or more meetings smoothed over time. ” I do not rule out the possibility of an increase at two successive meetings “, However, added Jerome Powell.
But the effects of US monetary policy will take time to kick in, he said, before inflation returns to the 2% target and stays there. ” Monetary policy has not been restrictive enough and for long enough “, Hammered the boss of the American central bank.
Rates: the Fed could strike twice more this year to stem inflation
While inflation is indeed on the way to a return to normal, the deceleration in price increases is taking place at a much slower pace than expected, in a context where the labor market and growth remain also stronger than expected. At the start of the year, the Fed had announced that it expected a slight recession during the second half of the year, but Jerome Powell does not rule out the fact that the American economy could avoid it.
« It’s not the most obvious possibility, but it’s still a possibility. “, he estimated.
(With AFP)
2023-06-29 14:16:00
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