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There are several factors that have been influencing the American economy towards the deceleration. However, experts refuse to believe in a possible recession.
The financial crisis resulting from Covid-19 is nothing new. To a greater or lesser extent, all countries have suffered from the sudden changes that the health crisis has caused in all sectors of society.
Although routines are gradually returning, financial reality is advancing at a slower pace. Thinking about big investments has become something distant, and the biggest reason for that is the uncertainties that this new reality has brought.
Market reality
The market in general is more contained. It is possible to observe a drop in the performance indices of several sectors. The highlight is manufacturing, which slowed down for the third consecutive month.
This does not mean that the sector is in fact in decline. Manufacturing accounts for 12% of the US economy and is supported by strong demand for goods. This is a solid supply source, which needs even denser factors to enter a risk zone.
In addition to manufacturing, New York State factory activity also remained weak, with backorders. Retail sales and construction of homes and permits also declined.
On wall street, stocks remain low and treasury prices have also fallen. Moody’s Analytics economist in West Chester, Pennsylvania, Justin Begley, believes that growth will be “pretty tepid”.
In general, spending has returned to services, which points to a more subsistent behavior of the population.
A sector that goes against this reality is energy. Mining and oil drilling grew for the second month in a row, reflecting Russian oil increases in response to the conflict against Ukraine.
Expectations
Although the indices have shown a general downturn in the economy, experts believe that a recession should not be feared yet.
In fact, the less encouraging results reveal something almost inevitable. There is currently a combination of factors that prevent large-scale, long-term investment. This applies to investors and the small consumer.
The sudden changes that the pandemic brought, followed by the armed conflict established between Russia and Ukraine in the European region, and also China’s rigid policy against the return of Covid-19, reveal a general paralysis of the economy.
The heating of the economy, mainly due to the increase in consumption, depends a lot on the confidence of the population. This confidence is not only in the amount of money available in the present moment, but mainly in the future moment.
Recent major changes have made consumers and investors become more cautious in this regard. The scenario must be considerably different for people to overcome this barrier and return to spending and investing as in the period before the pandemic.
In this context, the analyzes point out that the falls in the American economy do not reveal something to worry about, but only a natural result in the world of the globalized economy. Bigger drops in the indices will be needed to really reveal a recession trend.
For the time being, economic policy is content to follow a slowed growth, with a keen eye on this scenario and especially on interest rates. The objective now is to avoid inflationary growth.