A Recession is expected
Jimenez 5-25 [Miguel Jiménez; 5-25-2023; "Interest rate hikes slow down US economic growth"; EL PAÍS English; https://english.elpais.com/economy-and-business/2023-05-25/interest-rate-hikes-slow-down-us-economic-growth.html;]//LASA-بيلال
From January to March, The increase in real GDP reflected increases in consumer spending, exports, federal government spending, state and local government spending, and non-residential fixed investment that were partly offset by decreases in private inventory investment and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, increased, said the Bureau of Economic Analysis.
Interest rates are mostly holding back the construction sector, which is very sensitive to the price of money. Other sectors are seeing their activity slow down amid more restrictive financial conditions as well as inflation that is eroding consumers’ purchasing power. The labor market, however, remains very strong, with the unemployment rate at 3.4%, its lowest in more than half a century.
The Federal Reserve expects the U.S. economy to enter a recession at the end of this year, according to the minutes of its last meeting, released this Wednesday, which assumed that “the effects of the expected further tightening in bank credit conditions, amid already tight financial conditions, would lead to a mild recession starting later this year, followed by a moderately paced recovery.“