(Washington) Demand running out of steam, production at half mast, announcements of job cuts which follow one another, particularly in technology, the American economy multiplied the signs of a slowdown at the start of the year.
So far, despite inflation at record levels for more than 40 years and an express hike in rates by the Federal Reserve (Fed) in order to curb it as quickly as possible, the American economy seemed to be holding up the shock, between consumption which has been maintained for a good part of 2022 and a job market that is still very dynamic.
As proof, in December the unemployment rate was still at 3.5%, with job creations higher than expected. Similarly, retail sales continued to grow until October.
But since November, the trend has reversed, with a technology sector that seems to be increasingly suffering and increasing mass layoffs.
Latest, Microsoft announced Wednesday that it would lay off around 10,000 people by the end of March, after similar announcements at Amazon (18,000 people), Salesforce (8,000 employees) or Meta (11,000 laid off).
Despite the end-of-year celebrations and numerous promotions, including the famous Black Friday, in November and then in December, retail sales fell at the same time, each time more than expected.
According to the latest report published on Wednesday, the total amount of expenditure amounted to 677.1 billion dollars in December, a decrease of 1.1% compared to the previous month, the data of which were themselves revised in decrease (-1% instead of -0.6% initially announced).
Analysts were expecting a 0.8% decline in December, according to briefing.com consensus.
Admittedly, part of the decline is driven by the fall in prices, in particular fuel, but it also underlines that the Americans, after having dipped into their savings for a long time, no longer have as much margin.
Recession in sight
“This new drop puts consumption on a bad footing to start 2023”, estimated in a note Kieran Clancy, economist for Pantheon Macroeconomics, “consumers are starting to reduce their non-essential spending due to an uncertain economic environment”. .
Another cause: the rate hike by the Fed, which increases the cost of credit and in fact limits the spending capacity of both American households and businesses.
“Consumption slowed sharply in November and December. Rising borrowing costs and a noticeably sluggish job market will put additional pressure on consumers. But the gradual slowdown in inflation should support households,” HFE’s chief US economist, Rubeela Farooqi, said in a note.
Because inflation has now been in a slowdown phase for several months, at 6.5% over one year in December, according to the CPI price index unveiled on 12 January.
A trend that should also continue, because producer prices were down 0.5% in December compared to the previous month, while analysts were expecting a decline of 0.1%.
Over one year, these prices are now up by 6.2%, against 7.3% a month earlier, an additional element in the direction of a coming landing in inflation.
“Certainly part of the decline is explained by the volatility of final energy demand, which puts the good news into perspective. But the trend makes us anticipate annual growth in producer prices below 2% at the end of the first half,” said Matthew Martin, economist for Oxford Economics.
Another sign that should be seen with a good eye by the Fed: industrial production has also continued to decline, with in addition an industrial capacity utilization rate now below the average calculated between 1972 and 2021.
“Some sectors of the economy are more affected than others and industry seems to be heading for a mild recession, which should begin in the second quarter of this year”, for his part anticipated Ryan Sweet, chief economist at Oxford Economics. .