In the United States, the inflation surge and fear of a recession have eroded consumer confidence and stirred anxiety about the economy, which is sending frustratingly mixed signals.
Europe, highly dependent on Russian natural gas, appears especially vulnerable to a recession. The Fed is hoping to achieve a notoriously difficult “soft landing”: An economic slowdown that manages to rein in rocketing prices without triggering a recession.Īpart from the United States, the global economy as a whole is also grappling with high inflation and weakening growth, especially after Russia’s invasion of Ukraine sent energy and food prices soaring. On Wednesday, the Fed raised its benchmark rate by a sizable three-quarters of a point for a second straight time in its push to conquer the worst inflation outbreak in four decades. Consumers and businesses have been struggling under the weight of punishing inflation and higher loan costs. Higher borrowing rates, a consequence of the Federal Reserve’s series of rate hikes, clobbered home construction, which shrank at a 14% annual rate. Inventories tumbled as businesses slowed their restocking of shelves, shaving 2 percentage points from GDP.
Consumer spending slowed as Americans bought fewer goods. The GDP report for last quarter pointed to weakness across the economy.
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