This recession is remarkably silent…

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Despite outward appearances of economic stability with historically low unemployment rates, robust GDP growth, and strong consumer spending, subtle signals of an impending recession are surfacing in the United States. Citi’s chief U.S. economist highlights concerning indicators, pointing towards a potential recession by mid-2024.

One noteworthy aspect is the uncharacteristic silence of this recession, which has quietly manifested in various sectors. Credit card and auto loan delinquencies are on the rise, particularly among younger and lower-income households, signaling increased financial stress. Wells Fargo reportedly underwent another round of layoffs, reflecting ongoing challenges in the financial sector.

Additionally, the price of lithium, a critical component for electric vehicles (EVs), has plummeted to mid-2021 levels, down over 80% from its peak. Lackluster demand for EVs in the U.S. contributes to this decline, emphasizing a broader economic impact.

Furthermore, U.S. regulators, particularly the Federal Reserve’s chief bank watchdog, are intensifying scrutiny on commercial real estate loans amid new financial strains on lenders. Concerns loom over a potential default risk as about $1.5 trillion in commercial mortgage debt is due by the end of 2025, compounded by steeper borrowing costs and declining property values influenced by remote work trends.

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The Federal Reserve’s decision to raise interest rates to the highest level since 2001 in response to inflation adds complexity to the economic landscape. Policymakers signal that rates may remain elevated until they are confident inflation returns to the 2% target. With small and regional banks holding 80% of the $20 trillion commercial real estate market’s outstanding debt, there are apprehensions that lending standards could tighten significantly.

In summary, while surface-level economic indicators suggest strength, a closer look reveals vulnerabilities, including declines in full-time employment, reduced hours worked, and a hiring freeze in specific sectors. These subtle signs, coupled with economic challenges in various domains, warrant a cautious outlook for the U.S. economy in the coming months.


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