Economists Warn of Recession as PCE Inflation Hits 2.9% in Q4
Economists predict PCE inflation to hit 2.9% by the fourth quarter, up from 2.4% earlier this year. This rise coincides with President Trump's tariffs, which sparked a U.S. stock market crash and triggered recession fears. Moody's Analytics warns of a 48% chance of a recession in the next 12 months.
President Trump's 'Liberation Day' tariffs, announced in April, have reignited inflation. The Personal Consumption Expenditure (PCE) price index surged to 2.7% in August, the highest in six months. This inflation, coupled with a weak jobs market, has put the Federal Reserve in a difficult position, facing stagflation.
The U.S. stock market reacted sharply to the tariff concerns. The S&P 500 suffered a 32% average peak-to-trough decline during recessions since 1960. In early 2018, the market crashed due to these concerns, with the index falling more than 10% in just two trading days. The administration's subsequent delay of severe duties helped the market rebound. However, the U.S. job market has shown signs of slowing, with an average of 27,000 jobs added per month between May and August, the lowest rate since the Great Recession.
The U.S. economy faces a challenging period ahead. Inflation is rising, and the jobs market is weakening, with a significant chance of a recession in the coming months. Despite these signs, President Trump has defended his tariff policies. Economists and analysts, including those at Moody's Analytics, are closely monitoring the situation, with a 48% likelihood of a recession in the next 12 months.
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