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11Jun2018

Is There an Impending Recession? What to Look For

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June 2018

By Selina Stoller, Summit Consumer Receivables Acquisitions, LLC

 

The U.S. economy is in its best shape since the 2008 Recession. Unemployment hit an 18-year low, and average wage growth is expected to reach 3 percent in 2018.

If the economy is booming, why are some experts discussing an impending recession?

Experts predict a slump because things are going so well. Economic-expansion is currently the second-longest in U.S. history, and the late stage of economic expansion is most vulnerable. When things are going great, people make mistakes like overborrowing. This leads some economists to forecast a recession as early as next year.

Other factors typically move an economy into a recession. In 1990, it was an oil price shock. In 2001, it was the bursting of the dotcom bubble resulting in stock market decline. And in 2007, it was the housing market crash.

A recession is basically an outbreak of cynicism causing consumers and businesses to rein in spending.

Here are things to watch:

Higher inflation, asset prices

Falling unemployment and rising wages are good – but eventually higher pay forces companies to raise prices. Strong, steady growth could cause the Fed’s to raise rates faster. Higher rates and inflation push up other borrowing costs for consumers and businesses.

Escalating trade conflicts

Twenty-five percent tariffs on steel and 10 percent tariffs on aluminium have been put into place to combat foreign metals priced below the U.S. market. Potential retaliation from other countries, like China, could raise prices and deter U.S. exports.

Higher Energy Prices

Higher oil prices can zap consumer purchasing power. Some analysts believe new mandates will increase costs and bring back $4 per gallon gasoline.

 Budget Battle

Budget spending caps have been raised with most of the money devoted to higher defense spending. A potential showdown could occur when the nation’s debt limit must be raised in early 2019.

 

  • 11 Jun, 2018
  • Summit Consumer Receivables Acquisitions, LLC

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