A nice soft landing?
The latest growth figures suggest that the Federal Reserve might have achieved its ultimate goal, to cool inflation without sending the economy into a full blown recession — a “soft landing”. But, the jury is likely to be out for at least another 6-12 months, as the effect of higher interest rates takes time to filter through the economy, particularly when much of America’s household debt is at fixed rates.
No search results
Inevitably, when chatter of a potential recession starts getting louder, people start searching the internet for terms like "are we in a recession”. Indeed, last year, with near-record high gas prices and escalating grocery bills, Americans were searching for “recession” like never before.
In June 2022, a YouGov survey revealed that 3 out of 5 Americans believed the country was in a recession, though technically the threshold for a recession — often 2 consecutive quarters of negative GDP growth — was never met. The depressed mood persisted into this year, with a survey in May reporting that two-thirds of people anticipated a recession, with many fearing that the downturn could rival the severity of the 2007-2009 Financial Crisis.
Dude, what about my house?
While the US economy may not be red hot, it’s probably at least warmish. But one area that’s getting increasingly cold is the housing market. Prices soared during the pandemic, but are now down ~1% on this time last year, and homeowners seem to be refusing to sell, with the number of homes for sale at a record low.
That's worth watching closely, because nothing makes people tighten their purse strings faster than hearing their house is worth less than they paid for it, and consumer confidence is still the bedrock of the US economic machine.
The ~vibes~ matter
Indeed, you could spend an entire week poring over economic data (which… we did) trying to guess what happens next. But, much of the future is going to be driven simply by how we’re all feeling.
Economics is ultimately a tapestry woven by the interplay of policy, human psychology, and unforeseen events — everyone expecting a recession to happen doesn’t change the economic reality… until it does. If there's a lot of uncertainty in the air, maybe businesses decide to play it safe on their planned expansion, consumers save a little bit more this month, banks don’t lend as freely, and — suddenly — things can turn.
China is an interesting example, as the economy slows after 40+ years of lightning growth. There officials are so concerned with keeping up positive appearances that the government is reportedly pressuring local economists to avoid evendiscussing negative trends like deflation.
