Recession storm clouds gather – World Socialist Web Site

There is a tidal wave of warnings that the US, Europe and other parts of the world are quickly headed for a recession as key data points in that direction.

Under the underline ‘No more whispers’ Politics reported on Monday: “From Wall Street to Washington, whispers of an impending economic slump have risen to almost a roar as the Federal Reserve ramps up its fight against its highest inflation rate in four decades.”

As the Federal Reserve announces a rate change, traders work on the floor on the New York Stock Exchange in New York, Wednesday, June 15, 2022. (AP Photo/Seth Wenig)

The article cited price spikes — inflation in the US is at 8.6 percent — aggressive rate hikes that led to Wall Street’s worst first-half performance since 1970 and a drop in consumer confidence to an all-time low.

Economists, they continued, feared not only that a downturn would come, but that it would happen soon.

With so much economic activity in the US economy, both business and consumer, that relies on credit, the rate hikes implemented so far are having a significant effect.

The Department of Commerce has reported that GDP contracted 1.6 percent year-on-year in the first quarter, with estimates for second-quarter growth constantly being revised downwards. The growth estimate calculated by the Atlanta Fed indicates that GDP will contract by 2.1 percent year-on-year in the three months to the end of June.

The downward forecast came as the Institute for Supply Management’s Purchasing Managers Index showed the US manufacturing sector grew at its slowest pace in two years. Employment in the sector fell for the second month in a row after growing eight months in a row.

An indication of the effect of monetary policy tightening on consumer spending came with automaker General Motors’ announcement of a 15 percent drop in quarterly sales.

The clear slowdown in production is also visible in Europe. Eurozone production is weakest since August 2020, with new orders falling at the fastest pace since May 2020, according to S&P Global.

The commodities markets show the same trend. The price of copper, an important industrial metal known as Dr Copper because of the way it reflects broader trends, has fallen in the past month. Last week, it plunged below $8,000 a ton for the first time in 18 months, after hitting a record high of over $10,600 earlier in the year.

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