Continued GDP slowdown, Fed doubling down, cooling job market, skyrocketing prices and big tech explosion – these are the main economic facts of a busy week.
It was a week full of events and data for the US economy.
The Federal Reserve, the nation’s central bank, raised interest rates by 75 basis points on Wednesday, the second time in as many meetings, on hopes that rising borrowing costs will help balance supply and demand. demand On Thursday, estimates of gross domestic product (GDP) indicated that the US economy contracted for two consecutive quarters, raising concerns that the country could be headed for recession.
On Wall Street, some of the biggest names in US industry, including Apple, Amazon, Microsoft and Google parent Alphabet, posted better-than-expected earnings and forecasts, sending stocks higher. Other data showed that the US labor market is still very tight despite companies announcing layoffs.
After printing trillions of dollars during the peak of the pandemic to stimulate the economy and soften the shock to businesses and households, annual US inflation is now at a 40-year high and there are signs that the North -Americans feel the pain. Consumer spending, which accounts for more than two-thirds of all economic activity, may be in decline and retailers are bracing for the pullback.
Here are the main economic developments of a busy week:
Walmart cut its profit outlook for the second quarter and full year on Monday, stressing that rising food and gas prices are causing consumers to spend less on goods such as clothing that have higher profit margins. By Tuesday morning, Walmart shares had fallen nearly 9 percent, also dragging down major chains such as Target and Kohl’s. The world’s biggest retailer rarely cuts its profit forecast halfway through a quarter, so retail watchers questioned whether the retail industry’s warning was a sign of things to come for the whole the retail industry.
The decrease in consumer confidence
According to US statistics released on Tuesday, consumers are less confident about spending. The consumer confidence index fell for a third month to 95.7, from a downwardly revised 98.4 in June. This is the lowest reading since February 2021.
Fed doubles down, says further hikes depend on future data
The Federal Reserve raised interest rates by 75 basis points on Wednesday. The US central bank has stepped up its efforts to combat the highest inflation in more than 40 years and said “an unusually large increase may be appropriate” at its September meeting. That decision “depends on the data we get between now and then,” Fed Chairman Jerome Powell told reporters, as he stressed the central bank’s overall goal is to return inflation to “our 2 percent target.” Since March, the Fed has raised rates by 225 basis points.
Higher mortgages mean fewer home sales
The pandemic-era housing boom is cooling quickly as rising mortgage rates make it more expensive to buy and keep up with mortgage payments. Pending U.S. home sales fell in June by the most since April 2020, according to figures released Wednesday. “Early signs of a cooling effect are most evident in the housing market, a sector that has been hit hard by rising mortgage costs,” Peter Essele. , head of portfolio management at Massachusetts-based Commonwealth Financial Network, told Al Jazeera.
Microsoft, Alphabet, Apple and Amazon boost sentiment on Wall Street
Also on Wednesday, upbeat outlooks from Microsoft and Google parent Alphabet led to a rally in high-growth stocks. Microsoft shares rose after forecasting double-digit revenue growth this fiscal year. Google’s parent company, Alphabet, rose with better-than-expected sales. Apple and Amazon joined the big tech rally on Friday, adding about $175 billion to their combined market value after upbeat results boosted investor confidence. Amazon shares rose about 11 percent. Apple rose more than 3 percent as the tech giant said that, despite customers’ tighter spending habits, demand for iPhones remained strong.
The US economy contracted for the second quarter in a row, but don’t call it a recession
According to the preliminary estimate released on Thursday by the US Commerce Department, GDP declined at an annual rate of 0.9% after falling 1.6% in the first three months of the year. Informally, a two-quarter stretch of declining growth signaled that the economy is in a slump. Despite the numbers, US President Joe Biden and administration officials continued to say a recession is not imminent.
Hiring is slowing, but the unemployment rate is still at a 50-year low
The Labor Department showed on Thursday that while fewer Americans filed for jobless benefits for the first time in four weeks, the total remained the largest since November, raising the possibility that the economy slow down At 3.6 percent, the unemployment rate is the lowest it has been in nearly 50 years. The employment cost index released on Friday revealed that a tight labor market helped improve wage growth, leading to a significant increase in US labor costs in the second quarter. Labor costs rose 5.1 percent year-on-year, the biggest increase since the current series began in 2001. Several companies recently signaled their intention to cut their workforces. E-commerce firm Shopify said this week that it will let go 10 percent of its workers. Apple, Alphabet and Microsoft have also said hiring is slowing.
Despite the increases, higher prices are taking a bite out of Americans’ paychecks
Consumer prices rose 6.8 percent in June from a year earlier, the highest annual increase since 1982, the Commerce Department said Friday. The personal consumption expenditures (PCE) price index, which the Fed monitors to determine whether it is meeting its 2% inflation target, rose 1% from the previous month. On Friday, data also revealed that consumer spending rose 1.1 percent in June boosted by a higher cost of living. Americans spent more on both health and cars. With prices rising, inflation-adjusted means consumer spending rebounded only slightly in June – 0.1 percent.
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