OPINION
Market Rating Before FOMC MeetingJan 31
U.S. Recession Risks Increase
In this period, the GDP price index increased from 8.1 percent to 8.3 percent, while GDP sales fell from minus 0.4 percent to minus 1.2 percent. In the first quarter-final reading, real consumer expenditures decreased from 3.1 percent to 1.8 percent, while the individual consumption expenditures index increased from 6.4 percent to 7.1 percent. Finally, the core personal consumption expenditures index (PCE Deflator), known as the inflation indicator of the US Federal Reserve (FED), was realized at 5.2 percent, above the market expectations of 5.1 percent.
Looking at the details of the report published by BEA; In this period, the net contribution to growth came from real estate rental and leasing activities with 0.34 percent, while state and local government expenditures followed with 0.24 percent. On the other hand, non-durable goods fell 0.99%, retail sales 0.64%, and finance and insurance activities fell 0.61%.
In the report, it was stated that the decrease in exports was determined by the decrease in inventory investments, wholesale trade, mining and construction, while the increase in non-food and non-automotive consumer goods was the driving force in import activities.
Apart from the effects of the Russia-Ukraine war on the world's largest economy through foreign demand, it is understood that the purchasing power, which was the strongest inflationary climate in 41 years in the country, affected the domestic demand. In the context of the Fed's strong monetary tightening in the second quarter the negative levels can be see in the next data. These negative levels could suggest a technical recession, with repercussions for households and businesses to have difficult access to low-cost finance.
