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ANALYSIS: Five Signs Biden’s Economic Disaster Is About To Get Worse

REUTERS/Tom Brenner

Sarah Weaver Staff Writer
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Experts are calling it. The economy is about to get much worse, and a recession is imminent.

Economists say there is a 44% chance the US economy enters a recession in the next 12 months, according to the Wall Street Journal. In April, only 28% of economists polled by The WSJ said this, and in January only 18% did. Even Treasury Secretary Janet Yellen said she anticipated the “economy to slow” in an interview in June. Less than two weeks earlier, Yellen had downplayed fears about the future of the economy, saying, “I don’t think we’re going to have a recession.”

Americans are still breaking their wallets at the gas pump, consumer prices are at an all-time high, and inflation is skyrocketing. Unfortunately, five key indicators show that the economic crisis is only about to get worse.

American Consumers Are Pessimistic

A downturn in consumer sentiment is a significant indicator that rougher economic times are ahead. Consumer confidence dropped again in June, to its lowest level since February 2021, according to the Conference Board. The Expectation Index, which the Conference Board describes as, “based on consumers’ short-term outlook for income, business, and labor market conditions,” decreased to its lowest level since March 2013.

“Consumers’ grimmer outlook was driven by increasing concerns about inflation, in particular rising gas and food prices,” Lynn Franco, Senior Director of Economic Indicators at The Conference Board said of the trend. “Expectations have now fallen well below a reading of 80, suggesting weaker growth in the second half of 2022 as well as growing risk of recession by yearend.”

A poll released four days earlier corroborated the Conference Board’s findings. A University of Michigan survey found that US consumer sentiment had dropped in June to its lowest recorded level since November 1952.

The Supply Chain Is Weak

Most U.S. consumers have noticed that it simply takes longer for a package to arrive to your door than it used to. The product shortages that ensued from global supply chain problems jacked up prices. Higher prices mean Americans can buy less, and when spending contracts the economy suffers, even to the point of a recession.

“In the worst-case scenario, spending would contract so much that the entire economy enters a new recession,” Business Insider reported. (RELATED: New Home Sales Plummet, Sparking Recession Fears)

Much of the supply chain issues Americans contend with can be traced to the high gas prices faced by Americans. Average prices for a gallon of gas have gone down slightly over the last month, by about 23 cents, but more of that can be attributed to Americans simply being unable to afford to buy as much than it is indicative of any real economic recovery.

The Fed Is Raising Interest Rates

In an effort to curb spending and bring inflation down, the Federal Reserve is raising interest rates – it’s the biggest increase since 1994. But the tactic is not without its downsides, as it raises the cost of doing business for both private and public companies, according to Forbes. The rise in interest rates means a lower GDP, as officials now project a 1.7% gain in GDP, down from 2.8% in March, according to CNBC.

“Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending,” Fox Business explains.

The Fed evidently thinks the inflation crisis is bad enough to run a risky gambit by hiking interest rates. It might mitigate inflation, but in the short term, Americans are about to contend with an even higher cost of living. Fed Chair Jerome Powell admitted as much in June, saying, “Is there a risk that we would go too far [with rate hikes]? Certainly there’s a risk.”

Bond Investors Have Doubts About the US Economy

One of the biggest indicators of whether the economy is headed for a full on recession is found in the bond market. Normally, yields on older bonds are higher than those on shorter-term bonds. But recently, that trend has inverted, giving one of the most significant warning signs for a coming recession. (RELATED: The Billionaires Predicting The Country Is Going To Hell In A Handbasket Under The Democrats)

“We are at the pinnacle of a historic bubble. At any moment, the wheels will come off,” Crescat Capital analyst Otavio Costa said in a tweet.

The event is not a fluke, as now 60% of the US yield curve is now inverted.

U.S. Gross Domestic Product Is Falling

GDP growth for the United States in the second quarter of 2022 is at —1.2%, according to the Federal Reserve Bank of Atlanta. In the first quarter of 2022, GDP declined 1.6%. Two quarters in a row of declining GDP is the generally agreed upon definition of a recession.

While The National Bureau of Economic Research says two consecutive quarters in a row of GDP decline is not all that is necessary to declare a recession, CNBC notes that “since World War II there never has been an instance where the U.S. contracted in consecutive quarters and was not in recession.”

On Friday, Americans received what may at first seem like good news for the economy. In June, 372,000 jobs were added, outpacing economists’ predictions of 250,000. But economist Howard Forman says this may cause the Fed to raise interest rates, increasing the risk of a recession. The story points to the undeniable fact that fixing the post-pandemic mess of the US economy, will be no easy task. As economists are warning, our worse days may lie ahead.