May 26, 2024


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All the recession warnings this week

All the recession warnings this week

A tepid stock market, spiraling inflation, and rising interest rates have left Americans less optimistic about the state of the economy. Consumer sentiment has slumped to a record low, according to a University of Michigan survey last week, fueled by frustration over price hikes.

To be clear: We’re not in a recession, at least not yet. But signs of economic downturn are starting to appear everywhere, in sectors from basic goods to housing. Here’s what CNN Business reported last week:

metal prices It reached its lowest level in 16 months On Thursday after dropping more than 11% in two weeks – that’s bad news for investors who view copper prices as a leader in the global economy.

Copper is widely used in building materials, and is facing increased demand in an expanding economy. This demand disappears when the economy contracts.

Prices soared earlier this year when Russia, which accounts for 4% of global copper production, invaded Ukraine. Traders who were worried about a lack of supply began stockpiling the metal. And now, copper prices are declining.

“Copper prices are just beginning to explain the fact that global growth is slowing,” Daniel Ghaly, director of commodity strategy at TD Securities, told CNN Business’s Julia Horowitz.

Purchasing Managers Index

An index released by S&P Global on Thursday found that US private sector production slowed “sharply” in June. Producers of non-essential goods are doing just that, said Chris Williamson, chief trade economist at S&P Global Market Intelligence See a drop in orders Where consumers suffer from high prices.

The sharp increases in interest rates by the Federal Reserve are weakening the mood even more.

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“Business confidence is now at a level that would normally portend an economic downturn, increasing the risks of a recession,” Williamson said. Julia Horowitz, “CNN Business”.

Consumer confidence

A closely followed University of Michigan survey, released Friday, found that US consumer confidence Reached a new record high in June Lowest level recorded since the university began collecting data 70 years ago.

The June index has seen a 14.4% decline since May as consumers become increasingly concerned about inflation. About 79% of these consumers said they expect bad times for business conditions in the coming year, the highest level for this metric since 2009.

The percentage of consumers who blame inflation for eroding their living standards, 47% according to the June index, is just one percentage point below the peak achieved during the Great Recession.

“As it becomes increasingly difficult to avoid high prices, consumers may feel they have no choice but to adjust their spending patterns, whether by substituting goods or forgoing purchases altogether,” said Joanna Hsu, director of consumer surveys. “The speed and intensity with which these adjustments occur will be critical to the trajectory of the economy.”

gas prices

The good news: Americans can find some Relief on the way for gas prices.

The bad news is that traders are betting on a recession, said Alison Morrow of CNN Business.

When American drivers felt pain at the pump, they began backing off the gas this spring, slashing demand and lowering the price.

Although a dip in demand may bring temporary relief, It also points to broader economic concerns.

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“The market action this morning has recession fears all around,” Peter Bokvar, chief investment officer at Bleakley Advisory Group, wrote earlier this week. He estimated the odds of a recession this year at 99% because “nothing is 100%”.

housing stagnation

Better news: Calm housing market It may not harm the economy and the stock market.

Prices skyrocketed, leaving home ownership out of reach for many Americans, and mortgage rates soared after the Federal Reserve raised interest rates and increased bond yields.

But Lennar, the homebuilder whose shares are down nearly 45% this year, reported better-than-expected earnings on Wednesday and a 4% increase in new home orders.

However, Lennar’s CEO remained cautious, saying in the company’s second-quarter earnings statement that it was a “complicated moment in the market.”

Despite the slowdown in the housing market, experts hope it won’t spread to the economy the way the housing bubble burst in 2008.

“Banks are in a much better position now, and they don’t make loans to people with no credit or bad credit,” Michael Sheldon, chief investment officer at RDM Financial Group in Hightower, told CNN Business’ Paul R La Monica. “If there is a recession, the impact on housing could be mild. There are not as many imbalances as we had before.”

CNN Business’s Julia Horowitz, Alicia Wallace, Alison Morrow and Paul R. La Monica contributed to this report.