U.S. Economy Slows But Europe's Stabilizes

New York, NY, January 25, 2023-"Two of the world’s largest economies moved in opposite directions at the start of the year, with U.S. businesses reporting further declines in activity in January while the eurozone saw a modest pickup,” reports the Wall Street Journal.

“The divergence suggests that while the U.S. economy continues to lose momentum, Europe’s could be stabilizing, at least for now. The pace of contraction in U.S. firms slowed in January, according to new business surveys released Tuesday, a possible signal that the economy could be bottoming out, thanks to slowing inflation and resilient demand.

“Combined, the surveys point to a global economy that looks likely to slow this year but could avoid recession. The receding threat of energy shortages in Europe, a still-growing U.S. economy, and China’s post-pandemic reopening could offset the effect of higher prices and interest rates and keep the world from a steep downturn.

“In the U.S., the economy continues to expand late last year, despite the Federal Reserve’s string of interest-rate increases designed to cool the economy and bring inflation under control. Higher rates have weighed heavily on certain sectors and could be causing households to pull back.

Home sales fell almost 18% in 2022 from the previous year. Retail sales were down 1.1% in December and the labor market, while still vibrant, is starting to show cracks. Employers have shed temporary workers for five straight months. Some economists see lower temporary payrolls as a precursor to a broader decline in employment.

“Yet economists estimate the U.S. economy grew at a seasonally adjusted annual rate of 2.8% in the fourth quarter of last year, down slightly from 3.2% in the third quarter. Inflation, which hit a four-decade high last year, is cooling. Consumer prices rose 6.5% in December from a year earlier, down from a 2022 peak of 9.1% in June.”