Americans cut spending as three quarters have negative views on economy
Xinhua 28 Jun 2022, 15:55 GMT+10
- The proportion of Americans who view the current condition of the national economy as fairly bad or very bad has risen from 63 percent in April to the current 75 percent, a report on Sunday by The Hill cited the latest CBS News/YouGov poll as saying.
- The increased negative views come after the U.S. annual inflation hit a 40-year high of 8.6 percent in May, it said.
WASHINGTON, June 28 (Xinhua) -- Americans are changing spending habits as their negative views on the U.S. economy keep growing amid high inflation and economists' forecast that recession is near and stagnation is problematic in the long term.
The proportion of Americans who view the current condition of the national economy as fairly bad or very bad has risen from 63 percent in April to the current 75 percent, a report on Sunday by The Hill cited the latest CBS News/YouGov poll as saying.
The increased negative views come after the U.S. annual inflation hit a 40-year high of 8.6 percent in May, it said, adding that rising oil, food and shelter costs largely fueled the inflation spike.
The price hikes have left many Americans feeling unsure of their ability to retire, take vacation or even afford day-to-day items.
According to a recent Forbes Advisor survey of 2,000 U.S. adults, 70 percent of Americans are using their savings to cover rising prices.
The National Review reported on Tuesday that Americans are likely to "feel even more squeezed in the months ahead, as they burn through those accumulated savings" since inflation looks really bad at the moment.
On June 30, the U.S. Bureau of Economic Analysis will release the May personal savings rate numbers, which have steadily declined this year -- from 6 percent in January to 5 percent in March to 4.4 percent in April.
While citizens worry about declining living standards affected by soaring prices, economists are concerned about the rising possibility of a recession.
Economists recently surveyed by The Wall Street Journal have dramatically raised the possibility of a recession, now putting it at 44 percent in the next 12 months, up from 28 percent in April. The latest figure shows a level "usually seen only on the brink of or during actual recessions."
Fed Chair Jerome Powell said recently that the Fed's aggressive rate hikes could tip the U.S. economy into recession. "It's not our intended outcome at all, but it's certainly a possibility," Powell told lawmakers at a Congressional hearing.
With inflation well above the Federal Reserve's longer-run goal and an extremely tight labor market, the Fed raised the target range for the federal funds rate at each of the past three meetings. Last week, the Fed raised rates by 75 basis points, marking the sharpest rate hike since 1994.
IMF Managing Director Kristalina Georgieva said the IMF believes the path for the policy rate that the Fed has signaled -- to quickly get the federal funds rate to 3.5 to 4 percent -- is the correct policy to bring down inflation, but there may be "some pain" for consumers.
The IMF chief also said that the IMF is mindful of the risks to the U.S. economy. "We are actually seeing very significant downside risks this year and especially next year," she said.
Besides, economists see increased risks of stagflation on the horizon.
Some 80 percent of the recently surveyed economists believed that stagnation is the greater long-term risk to the U.S. economy than recession, CNBC reported, citing the Securities Industry and Financial Markets Association.
"Moreover, a recent Bank of America global fund manager survey found fears of stagflation are the highest they have been since June 2008," the report said.
Stagflation, a term coined in the 1970s to refer to a combination of high inflation and high unemployment, would be the most possible economic backdrop in the next 12 months, it added.
Meanwhile, according to Fox Business, the Wall Street is increasingly betting that the U.S. economy will tumble into a recession next year as the Federal Reserve raises interest rates at the fastest pace in two decades in order to curb inflation.
Bank of America Global Research strategists have ratcheted up the odds of an economic downturn to 40 percent in 2023, with the GDP slowing to almost zero by the second half of next year, said Fox Business.