While the rest of the world is heading towards a bright economic future, the United States is not just standing still but even pulling back. The title of the world's largest economy is not a guarantee of steady growth. Moreover, it is not a hedge against a recession.
News on challenges for the US economy usually starts with a few words about its growth. This one is no exception. This year, the US stock market has gained significantly. The economy is also performing well. Inflation is gradually easing. However, despite all of the above, the superpower is still at risk of sliding into a recession, analysts at Capital Economics warned. The research firm's survey shows financial conditions are currently at their tightest since the 2008 financial crisis.
The US economy is still on the brink of a recession despite tech stocks rallying this year and forecasts of a soft landing, analysts said in a note.
According to Capital Economics, a sharp increase in the key interest rate and the Fed's aggressive monetary policy as a whole have led to extremely tight financial conditions. This is evidenced by financial condition indices, or FCIs, which show that financial conditions in the United States, Europe, Australia, Canada, and Japan are approaching Great Recession levels. Another sign of a looming recession is a marked downturn in the credit market, experts noted. Interest rates on consumer loans have already topped 8%. Banks have cut back on lending and tightened up their lending standards, and net lending to the private sector has slowed to almost a halt. Money supply growth has also stalled, which also signals a slowdown in the economy.