Supply-chain disruptions largest hurdle for US economy: S&P Global

The US gross domestic product (GDP) growth forecast by the company dealing with financial information and analytics is 2.4 per cent for 2022 and 1.6 per cent for 2023 compared with 2.4 per cent and 2 per cent respectively in the May forecast.

While its baseline signals a low-growth recession, the chances of a contraction (a technical recession) are rising, the company noted in its Economic Outlook for the United States for the third quarter (Q3) of this year.

It assesses recession risk at 40 per cent (35-45 per cent band), reflecting a larger spike in prices with even more aggressive Fed policy heading into 2023. The wider band reflects increased uncertainty over the Russia-Ukraine armed conflict.

Supply-chain disruptions, worsened by the Russia-Ukraine conflict and the China slowdown, remain the largest stumbling block for the US economy. As inflation expectations become more entrenched, extreme price pressures will likely last well into 2023, S&P Global said.

The unemployment rate, at 3.6 per cent in May and just over its pre-pandemic level, will remain near that rate until early 2023 when it climbs higher as successive Fed hikes take hold.

With economic pressures worsening as the Fed tightens the screws, the company now expects the unemployment rate to top 4.3 per cent by the end of 2023 and climb over 5 per cent by the end of 2025.

Despite the extreme uncertainty around the conflict, the company expects the military conflict in Ukraine to last longer than it earlier thought, with sanctions to remain in place well after it ends.

Given limited direct trade and capital flow linkages between the United States and the region and as domestic activity largely drives the US economy, S&P Global does not believe the conflict, on its own, will tip the United States into recession.

Fibre2Fashion News Desk (DS)