Key Economic Indicator Signals Possible Recession

A key economic indicator appears to signal that the United States may face a recession in the not-too-distant future. Following a jobs report that signaled a likely continuation of high inflation, wholesale inventory figures may be a flashing sign of an upcoming downturn.

The figures released Monday show a second consecutive month of non-growth in wholesale inventories. Furthermore, the February figure was revised down. Compared to last year, total inventories are down more than 9%.

Sales among wholesalers are also more than 2% lower, and inventories outside of car sales declined by 0.2%. Furthermore, private inventory investment declined in the first quarter of 2023.

The inventory figures were not the only recent piece of negative economic news. This week, the New York Federal Reserve released figures that showed declining consumer spending.

According to April’s Survey of Consumer Expectations, Americans anticipate spending less than previously expected.

Consumers look to spend 5.2% more, the lowest figure in more than a year and a half. Furthermore, inflation figures dampened consumer confidence.

The survey showed that Americans expect to pay significantly more for gas and food in the coming year, but the average increase in wages is estimated at just 3%. As a result, in real terms, many Americans will be getting an effective pay cut due to inflation.

The negative economic figures also correlate with a lower-than-expected rise in national GDP.

The increase in GDP of 1.1% was less than half of the previous quarter and one of the strongest signals yet that the United States economy may be headed into a recession later in 2023, if not sooner.

Citigroup estimated that there would be a slowdown in the U.S. economy later this year, with a recession coming in the final three months of the year.

The negative economic news also comes as Wall Street weighs the pressure from three major bank failures this year. The recent collapse of First Republic Bank and its takeover by the FDIC may be the clearest sign yet that the current crisis has not passed.

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