Author: Xiao Yanyan
The Federal Reserve’s latest Beige Book on Economic Situations showed that all 12 Federal Reserve regions reported sustained economic growth, with most regions showing slight or moderate growth, and four regions showing moderate economic growth .
Notably, the Fed acknowledged that 4 regions specifically noted that the pace of growth has slowed since the last report , although contacts in most regions reported continued growth in manufacturing. Eight regions reported lower expectations for future economic growth among their contacts, and three regional contacts specifically expressed concerns about a recession .
Two regional contacts noted continued rapid price increases and three observed moderation. Most regions noted that their contacts reported strong price increases , especially for input prices. More than half of the regions mentioned some customer resistance to higher prices.
Residential real estate contacts observed weakness as consumers faced higher prices, the Fed warned.
Employment rose moderately in all regions. In most regions, companies reported strong wage growth , while most other regions reported moderate growth. While businesses generally expect wages to rise further next year, one region noted that companies’ expected wage growth has fallen for two consecutive quarters. Sources say labor market difficulties are their biggest challenge , followed by supply chain disruptions.
Overall, the Beige Book shows that the Fed is uneasy about a broad economic slowdown. U.S. manufacturing survey data on Wednesday night also raised the threat of stagflation and prompted the Atlanta Fed to cut its second-quarter GDP growth forecast to 1.3 percent from 1.9 percent .
The June 1 GDPNow model’s estimate of real GDP growth (a seasonally adjusted annual rate) in the second quarter of 2022 was 1.3%, down from 1.9% on May 27, the Atlanta Fed said.
Financial blog Zero Hedge said the stagflation trend couldn’t be more pronounced in the long run. It also makes sense in JPMorgan CEO Jamie Dimon’s warning about preparing for an “economic hurricane.”
Dimon warned investors to prepare for an economic “hurricane” as the economy faces a series of unprecedented challenges, including monetary policy tightening and the conflict between Russia and Ukraine.
Dimon said at a conference sponsored by AllianceBernstein Holdings on Wednesday:
“This hurricane is right in front of us. We don’t know if it’s a small storm or a superstorm. You better prepare yourself.”
Dimon said at JPMorgan’s investor day in May that there were “dark clouds” hanging over the U.S. economy, but said he had updated that forecast given the challenges the Fed faces as it tries to rein in inflation. “It’s sunny now, everything is fine, and everyone thinks the Fed can handle it,” Dimon said.
JPMorgan economists last month cut their U.S. growth forecast for the second half of 2022 to 2.4% from 3%, the first half of 2023 to 1.5% from 2.1%, and the second half of 2023 to 1.5%. Growth forecasts were revised down to 1% from 1.4%.
Dimon said Wednesday that JPMorgan is now taking a conservative approach to its balance sheet as a preparation for such turbulence.
edit/isaac
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