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| Is the US economy at risk of recession in the second half of 2023? (Source: Lai Times) |
Speaking to reporters at the US Congress, Republican House Speaker Kevin McCarthy stated: “We are forced to pause (negotiations)… We cannot allocate more money for next year,” while mentioning the lack of positivity from the Democrats.
Also on May 19, the White House confirmed that many major disagreements still exist between Republican lawmakers and US President Joe Biden's negotiating team during negotiations on raising the public debt ceiling to avoid the risk of default for the world's largest economy.
The White House statement quoted a senior US administration official as saying: “There are real disagreements between the parties on budget issues and the negotiation process will face many obstacles… The President (Biden)’s (negotiating) team is working towards a solution that is acceptable to both parties, so that it can be passed by the House and Senate.”
President Biden, who is attending the Group of Seven (G7) summit, will cut short his trip to the Asia-Pacific region to return to Washington on May 21 to try to reach a debt deal with Republicans.
Meanwhile, economists predict that the US economy will continue to slow down in the second quarter of 2023, while declining consumer spending and business investment could cause the world's number one economy to fall into recession in the second half of 2023.
US gross domestic product (GDP) is expected to grow 0.5% in the second quarter, less than half the first quarter's GDP growth, according to the latest monthly Bloomberg survey of 70 economists.
However, this forecast is still higher than the 0.2% forecast given by economists last month, thanks to an increase in household spending.
The odds of a U.S. recession in 2024 remain steady at 65%, according to economists surveyed. Meanwhile, forecasts for the Federal Reserve’s preferred price gauge have edged higher, and economists now see private investment falling more sharply in the second half of 2023 than previously expected.
According to Luke Tilley, chief economist at Wilmington Trust Corp (USA), in the context of companies struggling with higher financing costs and limited credit in 2023, cutting investment costs and cutting jobs will lead to a mild recession in the second half of 2023.
The survey, conducted from May 12 to 17, also showed economists still believe the Fed will keep interest rates on hold until the end of 2023, before cutting rates in the first quarter of 2024.
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