2024-08-05 17:59:42
“First of all, fears about the future jumped to the highest level in the last 4 years – more than they were even on February 24, 2022. There are several reasons – fears of an outright war between Israel and Iran and the possibility of a US recession due to economic stagnation, but at the same time oil shot down to $75 (graph below) and the US grew faster than expected in the last quarter.
Gold is also lower, but there are fears of instability, which seems strange. It’s a strange Monday,” M. Dubnikovas commented on Facebook.
A. Izgorodin also wrote about this on the social network on Monday. “Recently, the financial markets in the US (and beyond) have been in a state of panic – markets are worried that the US central bank is delaying interest rate cuts and that the American economy is about to plunge into recession,” he notes.
According to A. Izgorodin, several indicators point to the impending economic slowdown in the USA, one of the indicators is the so-called Sahm rule, which is related to the increase in the unemployment rate in the USA.
“Was the outcome of the US labor market really poor?” he asks rhetorically. – No, and the whole point lies in the details. Of all the U.S. labor market indicators, the change in full-time employment and the change in the number of U.S. road transportation workers have the strongest correlation with U.S. GDP. I want to point out that the result of both indicators was good, that is, these indicators do not indicate a significant deterioration of the situation in the US labor market. This means that some one-off factors had a large influence on the increase in the US unemployment rate, which the market was so afraid of. And this means that the next result of the US labor market indicators may be noticeably better.”
Although the US economy may be slowing, there are a few things to remember: the US central bank has a lot of leeway to cut the benchmark interest rate, which currently stands at 5.5%; Whichever candidate wins the US presidential election, the US faces a new wave of government spending growth.
The risk is also visible – the hasty reaction of central banks. As the economist explained, central banks give in to panic in the markets, start cutting interest rates quickly and start stimulus. “In that case, another wave of inflation would await us. It is very important that central banks adequately assess the situation and do not panic,” he assured.
“How will turbulence in the US economy affect the Lithuanian economy?” In theory – bad, in practice – not necessarily. The main risk is to the exporting sectors, i.e. industry. But in practice, the turbulence in the US economy is not only a risk but also an opportunity for our industry. As the US economy slows down and German industry stagnates even more, German manufacturers will be even more inclined to open their value chains and give more orders to Lithuanian manufacturers.
This is already happening now – the indicators of the Lithuanian industry, in the best sense of the word, strongly contrast with the decline in production in Germany. Lithuania’s economy and exporting sectors remain competitive, so we have the opportunity to use turbulence in the markets to our advantage – we have all the instruments for this, the most important thing for business is not to panic and keep a clear mind”, wrote A. Izgorodinas.
2024-08-05 17:59:42