Slowdown: Sectors slump, consumer debt surges, and Citi Economic Index plummets

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As the second quarter unfolds, the US economy finds itself at a crossroads, grappling with a myriad of challenges that threaten to derail the fragile recovery. Data from S&P Global paints a bleak picture: most sectors are experiencing a slowdown, with consumer services and industrials barely managing to scrape together marginal gains in April. In a stunning reversal of fortune, technology and healthcare, once stalwarts of growth, have plummeted into contraction territory for the first time in 14 months—a stark indication of the severity of the downturn.

Adding to the gloom, the US composite PMI from S&P Global for April reveals the slowest year-to-date growth in business activity. Employment, new orders, and business confidence all register declines, painting a grim portrait of an economy in distress. While inflation has moderated slightly, it remains stubbornly above pre-pandemic levels across both manufacturing and service sectors, adding further pressure to an already strained economy.

But perhaps most concerning of all is the state of consumer finances. The default rate on consumer loans has surged above pre-pandemic levels, reaching heights not seen since 2012. While still below the levels witnessed during the Great Financial Crisis, the rising pace of defaults is reminiscent of past economic downturns, raising fears of a looming financial crisis.

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In a cruel twist of fate, the Citi Economic Surprise Index crashes to a dismal -7.30, the lowest since January 2023—a sobering reminder of the depth of the economic malaise gripping the nation. As if to underscore the severity of the situation, this negative surprise comes at a time when hopes for a swift recovery are already fading.

As policymakers scramble to stem the tide of economic decline, one thing is abundantly clear: the road ahead is fraught with peril, and the stakes could not be higher. From slumping sectors to surging consumer debt, the warning signs are impossible to ignore. The question now is whether decisive action will be taken to avert disaster, or if the US economy is destined for a prolonged period of stagnation and hardship.

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Are US consumers’ finances seriously stretched?

 

 

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