money U.S. economy is slowing down: Economist
The U.S. economy cooled off during the first three months of 2023, as gross domestic product grew at a 1.1% annualized pace missing economist expectations. Driving that slowdown is reduced spending by businesses, a drawdown in inventories and a shrinking housing sector as high rates curb mortgage demand. Investors and economists alike will be looking to Friday's jobs report for further signs of a slowdown after March's report showed signs of weakness as labor force participation declined.
"I feel like we're always pushing out that start of that recession. You know, at one point last year, everyone thought that it was gonna be kicking in in 2022, now... we have moved it into the second half or the midpoint of 2023," said BMO Sr. Economist Jennifer Lee in an interview with Yahoo Finance's Brad Smith and Diane King Hall. "Certainly all indications are pointing to that, that slowdown, it's already happening. I haven't seen a lot of indications pointing to a very hard landing just yet, but things are slowly slowing"
That slowdown is attributable to the Fed's ongoing rate hiking cycle as it looks to curb demand to bring inflation back down to its two percent target.
Video highlights
00:00:05 Pushing out the start of a recession
00:00:25 Signs of a U.S. slowdown
00:00:42 Odds of a U.S. contraction
Video Transcript
JENNIFER LEE: So right now, I find it kind of interesting that-- for example, last week with the US first quarter GDP figure at 1.1%, definitely below expected. But I feel like we're always pushing out that start of that recession. At one point last year, everyone thought that it was going to be kicking in 2022. And now we're moving into-- or we have moved it into the midpoint of 2023. That hasn't changed our goal or our view at all.
Certainly all indications are pointing to that slowdown, it's already happening. I haven't seen a lot of indications pointing to a very hard landing just yet, but things are slowly slowing, which is totally as expected after almost 500 basis points of rate hikes. So you have to believe that this is going to happen. Whether or not is going to be a hard landing or a soft landing is a different question, and we're still looking for a mild contraction for the entire year.
