US Economy Teeters on Recession

The possibility of a recession in the US has been a topic of discussion among economists, with some predicting a downturn within the next 18 months. Several factors contribute to this forecast, including the aftermath of the COVID-19 pandemic, vulnerability of big firms, surge in oil and energy prices, and an inverted yield curve.¹

The COVID-19 pandemic led to a significant increase in inflation, with the US experiencing a 41-year record high inflation rate of 9.1% in June 2022. Although inflation rates have dropped since then, consumers continue to struggle with diminishing household incomes and supply chain issues.

The US economy's growth has been slowing down, with a 2.3% annualized growth rate in the fourth quarter of 2024. While this growth is still considered robust, there are concerns about the sustainability of consumer spending, which has been driving economic growth.²

In preparation for a potential recession, experts recommend building an emergency fund to cover three to six months of living expenses. It's also essential to prioritize debt repayment, focusing on essential expenses such as rent/mortgage, car payments, and minimum credit card payments.³

The Federal Reserve has been working to balance inflation and economic growth, with the federal funds target rate remaining between 4.25% and 4.50%. However, there are concerns about the impact of higher interest rates on consumer spending and economic growth.

While the possibility of a recession is a concern, it's essential to note that the US economy has shown resilience in the past. With careful planning and preparation, individuals and businesses can navigate potential economic downturns.

Key factors contributing to the recession forecast include:

_Inverted Yield Curve_: A sign of declining investor confidence in long-term economic growth.
_Surge in Oil and Energy Prices_: Contributing to inflation and decreased consumer spending.
_Vulnerability of Big Firms_: Layoffs and restructuring in response to economic uncertainty.
_Aftermath of COVID-19 Pandemic_: Ongoing impact on inflation, consumer spending, and economic growth.

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