WASHINGTON, June 30 (Xinhua) -- The U.S. economy is showing mixed signals as the country recovers from the COVID-19 pandemic. Some economists contend the economy is in good shape while others warn of impending gloom and doom.
Since the start of the year, equity prices have fallen by around 25 percent, bond prices have declined by more than 20 percent, and the cryptocurrency market has lost more than half of its value, according to Desmond Lachman, resident fellow at the American Enterprise Institute and a former official at the International Monetary Fund.
That has involved the evaporation of around 15 trillion U.S. dollars, which could cause consumers to cut back heavily on spending, Lachman told Xinhua.
In the meantime, Americans are feeling the sting of the worst inflation in 40 years, as well as record high interest rates and gasoline prices.
The personal consumption expenditures (PCE) index, a key measure of consumer spending closely watched by the U.S. Federal Reserve, increased 0.2 percent in May - a slowdown from the previous month's rise, according to the U.S. Bureau of Economic Analysis on Thursday. Inflation-adjusted consumer spending, however, dropped 0.4 percent.
Investment guru and Ark Invest CEO Cathie Wood, as well as Wharton School of Business professor Jeremy Siegel, both told CNBC earlier this week that the country is already in a recession.
"We think we are in a recession, and we think a really big problem out there is inventories - the increase of which I've never seen this large in my career," Wood said during the interview.
The investment sage noted retail giants such as Target and Walmart, which have recently warned they are struggling to manage high inventories.
In a separate appearance, Siegel told CNBC: "I think we're actually in a mild recession."
Bill Dudley, former president of the Federal Reserve Bank of New York and now with Bloomberg Economics, believes a recession is inevitable in the next 12 to 18 months.
The University of Michigan's consumer sentiment index last week saw the measurement drop 14.4 percent from May -- the lowest level on record.
Lachman told Xinhua that the Fed is being forced to slam on the monetary policy brakes hard, in a bid to bring inflation back under control.
That is likely to involve a recession and a rise in jobless numbers, Lachman said.
Even Fed Chair Jerome Powell recently said that recession is "certainly a possibility" though "it's not our intended outcome at all."
However, some economists expressed optimism.
Brookings Institution Senior Fellow Barry Bosworth told Xinhua a recession in 2022 seems "very unlikely given the strength of the labor market," with record low unemployment and strong demand for workers.
The outlook for 2023 is more dependent on actions of the Fed, although the risks of recession remain below 50, Bosworth said.
Inflation should slow over the remainder of this year and approach 3 percent in 2023, Bosworth said.
James Paulsen, chief investment strategist of The Leuthold Group, a U.S. investment research firm, told Xinhua he believes the country is not in a recession.
There is "super-charged, incredibly strong employment growth... You still have growing consumption, rising profits," Paulsen said.
As far as the possibility of a recession in the coming year, "I think the odds are against that as well," Paulsen said.
"The biggest thing is balance sheets, (they are) just really strong in the corporate sector, the household sector and in the banking industry," Paulsen said.
Fears of recessions are "in part due to the bizarreness of this cycle, which from the get-go created a lot of pessimism that never really lifted," Paulsen said.
"We've got a crisis that's got a death count associated with it, we've got a crime wave, political discord, shortages of goods - there's a lot of reasons to be pessimistic," Paulsen said, but reiterated he does not foresee a recession around the corner.
According to the Atlanta Federal Reserve's GDPNow model updated on Thursday, the U.S. GDP is estimated to contract at a seasonally adjusted annual rate of 1.0 percent in the second quarter.
With first-quarter contraction of 1.5 percent, a second consecutive quarter of negative growth would meet the definition of a recession.
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