Why the United States is on the verge of a “great recession”, according to Deutsche Bank

There are already several indicators that anticipate that the United States is heading into a recession, Deutsche Bank had indicated since the beginning of the month that it was a “slight” recession but in the last note of the bank for the clients it has raised the tone pointing out that it is a “major recession”.

In their latest note, the bank’s economists warn that this is a more severe slowdown within the next two yearscaused by the search of the Federal Reserve (Fed) to address the inflation that it does not see and that it intends to control with a series of increases in interest rates.

“We will have a major recession, but our strong view is that the sooner and more aggressively the Fed acts, the less long-term damage to the economy.”the analysts wrote in the financial report “Why the coming recession will be worse than expected”.

The analysis indicates that although inflation could be peaking, it will take a long time before it goes back down to the Fed’s target, which is 2%which means that the central bank will aggressively raise interest rates to the detriment of the economy.

“We think that… the Fed will most likely have to put the brakes on harder, and that it will take a deep recession to put inflation at baythe economists noted.

At the beginning of the month Deutsche Bank had anticipated a “mild” recessionbut his diagnosis worsened as the Fed is confirmed to raise rates sharply.

The information from Deutsche Bank is released after the Bureau of Economic Analysis (BEA) announced this Thursday that the Gross Domestic Product (GDP) of the United States decreased at an annual rate of 1.4% in the first quarter of 2022after it increased by 6.9% in the fourth quarter of 2021.

The decline in GDP reflected declines in private inventory investment, exports, federal government spending, and state and local government spending.

Bank of America (BofA) and Goldman Sachs have also touched on the likelihood that a recession occurs in the next two years in the United States.

In the week Ken Hoexter, BofA’s managing director of trucking research, noted that carriers are seeing rapidly weakening demand for trucksas it has fallen for the fourth consecutive month to its lowest level since June 2020.

Annually, the indicator has plummeted 23%, which means that “(it is) close to the level of recession in freight transport,” warned the analyst, who assures that road transport is a fairly accurate indicator that shows how is the economy of the United States and that is why it is considered a reliable benchmark, because when people buy fewer products, companies ship less and business slows down.

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