Economy may suddenly slow

https://www.wsj.com/articles/after-rapid-recovery-watch-for-…

**After Rapid Recovery, Watch for Sudden Slowdown**
**As fiscal and monetary policy reverses course and gasoline prices eat into spending power, growth could slow abruptly**
**By Greg Ip, The Wall Street Journal, April 13, 2022**

**...**
**The economy could start to slow abruptly, for three reasons.**

**First, fiscal policy pushed demand up in both 2020 and 2021, through stimulus checks, enhanced unemployment insurance, money for state and local governments, an expanded child tax credit and forgivable business loans. Almost all have expired and, apart from a few steps such as state-level tax cuts, nothing new is taking their place. Fiscal support contributed 7.6 percentage points to inflation-adjusted gross domestic product in the first quarter of 2021, subtracted 2.1 points in the first quarter of this year....**

**Purchasing power has been sapped by inflation....**

**Rising interest rates...** [end quote]

Extraordinary fiscal stimulus from Congress and extraordinary monetary stimulus from the Federal Reserve – huge, unprecedented programs – prevented a long Covid-19 recession. Carried on too long, they resulted in inflation. The programs are being simultaneously withdrawn.

The economy is already predicted to slow. The question is whether it can be moderated or will fall into recession.

https://www.atlantafed.org/cqer/research/gdpnow

Wendy

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WSJ is reporting a slow down in truck shipments this quarter. First quarter is usually slow after the holidays and before Easter.

Is this normal seasonal slow down or is refilling empty warehouses from Covid completed or is the economy slowing from high gas prices and less pocket money to spend.

Good question!

Let’s look at inventories. In the past, a buildup of inventory was often a prelude to recession as manufacturers cut production to prevent an overbuild of inventory.

Inventories are building but the "Retailers: Inventories to Sales Ratio, " which fell off a cliff in 2020, is near a historic low.

https://fred.stlouisfed.org/series/RETAILIRSA

https://fred.stlouisfed.org/series/BUSINV

The level of inventories is far below the historic norm. Whatever the reason for the slow down, it’s not because warehouses are refilled.

Wendy

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Inventories are building but the "Retailers: Inventories to Sales Ratio, " which fell off a cliff in 2020, is near a historic low.

Regardless of the money supply there is plenty of demand in the economy in all income brackets. The FED taking shrinking the money supply is just beginning to play out. As it plays out I expect inventories to rise.

Interesting that supply chain disruptions weren’t mentioned.

https://jalopnik.com/thousands-of-trucks-are-stuck-at-texas-…

We do continue to hear the economy is strong at present but a slowdown is expected. Timing is uncertain.

A recession requires two consecutive quarters of declining GDP growth. If we infer growth continued 1st qtr, earliest recession can be reported is mid-October. And many think it may take a year.

The uncertainty makes for a volatile stock market as investors continue to waiver on the future.

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A recession requires two consecutive quarters of declining GDP growth.

IIRC, it is negative GDP growth.

DB2

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