Americans are already feeling stagnant

New York (CNN Business) – Is economic recession looming in the United States? Or are you already in one? The answer is practically irrelevant.

To many Americans, it already feels like a recession. The high prices of almost everything make it difficult to pay daily expenses and monthly bills. The stock market has plummeted this year. Home sales began to decline. Consumer confidence is low.

A recent Morning Consult/Politico poll showed that 65% of American voters said in mid-July that they thought we were in a recession… and that’s compared to just 51% who said that in March 2020, the coronavirus started. The outbreak and start of the last recession.

According to a survey conducted by the Boston Consulting Group last month, nearly 80% of investors expect the US recession to begin sometime within the next 12 months… More than half of those surveyed believe it will begin before the end of 2022.

So, if you take perception as a reality, these numbers may matter as much or more than actual data about job growth and the economy as a whole.

“People are preparing for the fact that we are either in a recession right now or there is a good chance that we will be in a recession soon,” said Hadi Faraj, partner and associate director at Boston Consulting Group.

The Fed will have to factor in inflation concerns as it tries to balance aggressive rate hikes with concerns that excessive tightening will destroy growth.

The Federal Reserve is expected to raise interest rates this month by another three-quarters of a percentage point, after a similar move in June.

“The word recession is casting a shadow over the markets, but somehow, the only way out of this inflationary environment is for central banks to lead into this recession,” said Mabrouk Shatwan, head of global market strategy at Natixis Investment Managers Solutions. Email report this month.

With this in mind, investors need to prepare for a recession that appears to have already begun, and policymakers need to prepare for slower growth…or worse.

The US economy contracted in the first quarter and investors are anxiously awaiting Thursday’s GDP report to see if GDP contracted again in the second quarter.

Although two consecutive quarters of negative numbers is what is generally understood as a recession, this is not the official definition.

A group called the National Bureau of Economic Research (NBER) is responsible for officially declaring the beginning and end of an economic downturn, and the National Bureau of Economic Research tends to wait several months before making any decisions about the onset of downturns. slack

Treasury Secretary Janet Yellen said in an interview broadcast Sunday on NBC’s “Meet the Press” that the recession is a “widespread contraction in the economy that affects many sectors,” adding that she would be “surprised” if the National Bureau of Economic Research said Economy. It’s in the doldrums now.

But there will likely be a lot of talk of a recession this week if the Q2 GDP report disappoints.

Not all recessions are the same

“Recession is not our primary case. We continue to expect the economy to slow significantly but avoid a recession in 2022,” Katie Nixon, chief investment officer at Northern Trust Wealth Management, said in a recent report. But he added that “the technical definition of a recession may still be met.”

BCG’s Faraj also noted that even if the economy did indeed enter a recession, that doesn’t mean the downturn would be as long and painful as some previous recessions. Faraj said most investors do not seem to expect a repeat of the early 1980s or another major recession like the 2008 recession.

“No two recessions are the same,” he said. “I don’t think people are too worried about a big recession or a massive recession.”

It’s also worth remembering that in the event of a recession, the Federal Reserve could quickly reverse course and start cutting interest rates again to try to restart the economy.

This is exactly what the central bank did after a series of interest rate increases in 1999 and early 2000, just as the dotcom bubble burst. But once the economy went into recession in 2001, the Fed cut interest rates 11 times that year.

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