May 19, 2022 2 min read Business

Fear of US Recession Rises as Retail Earnings and European Economies Cause Concern

Experts warn of recession as US retailers report mixed quarterly results and European economies see inflation and slowing economies.

The U.S. economy could be heading for a recession in the next year, according to growing warnings from banks and economists, as a sudden bout of economic pessimism hammers financial markets that had been counting on sustained economic momentum, reports the Washington Post.

U.S. may be barreling toward recession in next year, more experts say (Washington Post)

Excerpt from the Washington Post: Although major swaths of the economy — including the job market and consumer spending — remain robust, there are mounting worries that rising borrowing costs for consumers and businesses, after years of near-zero interest rates, could cause a sudden retrenchment. "Recession risks are high — uncomfortably high — and rising," said Mark Zandi, chief economist at Moody’s Analytics. "For the economy to navigate through without suffering a downturn, we need some very deft policymaking from the Fed and a bit of luck."

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Meanwhile, Walmart, Target, Home Depot and Lowe’s reported quarterly results this week, and each offered a different perspective on where and how people are spending their money, according to CNBC.

Walmart said some of its more price-sensitive customers are beginning to trade down to private-label brands, while Home Depot emphasized the resiliency among its customer base, a sizable percentage of which is professional home builders and contractors. The reports came after Amazon in late April flashed warning signs for the retail industry when it booked the slowest revenue growth for any quarter since the dot-com bust in 2001 and offered up a bleak forecast.

Here’s what Walmart, Target, Home Depot and Lowe’s tell us about the state of the American consumer (CNBC)

Excerpt from CNBC: The mixed commentary from these retailers is in large part due to the fact that Americans are experiencing economic volatility differently, dependent upon their income levels. Companies and consumers are in an uncharted transition period following months of Covid-related lockdown measures that prompted purchases of canned goods, toilet paper and Peloton Bikes to soar. Multiple rounds of stimulus dollars fueled spending on new sneakers and electronics. But as that money dries up, retailers must navigate their new normal.

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Fears about rising prices and slowing economies have spread to UK and European stock markets following sharp falls in the US and Asia, reports BBC News. On Wednesday, US shares recorded their biggest one-day drop since the early days of the Covid pandemic in 2020 as markets were spooked by gloomy forecasts from major US retailers.

Global stock markets fall as growth fears rattle investors (BBC News)

Excerpt from BBC News: Countries are also grappling with steep rises in inflation - the UK's reached a 40-year high of 9% in April - and there are concerns that some economies are heading for a slowdown as interest rates are increased in an attempt to counter price rises. "A red wall of worry has built up across financial markets with investors increasingly nervous that economies are set to career into recession," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.

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