New York (CNN) – and thus, two of the two largest economies in the world are in technical recession.
On Thursday, both Japan and the UK reported their other consecutive negative quarters of the GDP, widely agreed to a recession.
Can America, the world’s largest economy, be ahead? Far away from
Japan’s economic contraction is associated with its shrinking population, written to Paul Donovan, the chief economist of UBS Global Wealth Management, in a note on Thursday. In 2022, the country’s population declined by 800,000, which marks the 14th consecutive year contraction. Donovan said that the country limits the ability to grow because it means “fewer people make and consume them.”
In the UK, however, the increase in population and wages was not enough to fall in consumer spending, one of the main drivers of that economy.
American economy status
The polar contrast occurred in the US. In the previous two quarters, the country’s economy experienced much more than GDP growth, due to a large part to strengthen consumer expenses.
Epidemination incentives in the US economy have an edge over the most advanced economies for $ 5 trillion, which helps in the finance of domestic finance. Another advantage is less dependent on Russian energy, making it less vulnerable to an increase in natural gas prices compared to many other countries that occurred in February 2022 after a full -scale invasion of Ukraine.
But Thursday’s US retail sales for the month of January came much less than expected, suggesting that Americans could have a little more tightly tied to their belt after a record holiday season.
Nevertheless, the labor market remains remarkably strong, as is clear from the country’s unemployment rate, which has been below 4% for 24 straight months.
Will there be American recession in 2024?
The American economy can be in a slowdown without knowing Americans.
This is because the economy is not considered wide and officially in recession unless a relatively unknown group of eight economists says so.
The group, known as a business cycle dating committee in the National Bureau of Economic Research, judges the beginning of a recession based on “a significant decline in economic activity that extends into the economy and lasts over a few months.”
There is no definite rule that it includes this, but it may include factors like spike in unemployment rate, falling income, a large decline in expenditure or negative economic growth rate.
However, the important thing is that two consecutive negative quarters of GDP are not always qualified as a recession. The US experienced that in 2022, and the NBER committee did not announce the recession.
The risk of recession has been increased as the US Federal Reserve launched its tough cycle in March 2022, Fed Chair Jerome Powell told reporters in December. However, he said, “There is little basis to think that the economy is now in recession.”
But when the economy feels that although it has never been better, there is always a possibility of recession in the following year, Powell said.
This is because unpredictable economic shocks – as, say, a global epidemic – can occur at any point.
Keeping aside, Philip Carlson-Sazlezak, the global chief economist of the Boston Consulting Group, does not think the US will enter the recession this year. Rather, “this is going to be a slow growth year,” he said.
He said, “The flexibility of the American economy lies in the fundamental powers,” between them, among the major labor markets and the personal finance of the Americans, he said.
Although they do not think this is likely, there may be a possible route for recession in the US if the Fed does not cut interest rates in all this year.
Since investors are widely pricing in the possibility of several rate deduction in 2024, it can damage the financial markets if they do not leave, which can cause adequately damage to ignite the recession, said Carlson-Sazlezak.
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