NATIONAL NEWS

US economic growth likely slowed in January-March quarter

Apr 26, 2023, 2:57 PM

File - A steel worker inspects a 155 mm M795 artillery projectile during the manufacturing process ...

File - A steel worker inspects a 155 mm M795 artillery projectile during the manufacturing process at the Scranton Army Ammunition Plant in Scranton, Pa., Thursday, April 13, 2023. On Thursday, the Commerce Department issues its first of three estimates of how the U.S. economy performed in the first quarter of 2023. (AP Photo/Matt Rourke, File)
Credit: ASSOCIATED PRESS

(AP Photo/Matt Rourke, File)

WASHINGTON (AP) — Despite surging interest rates, punishing inflation and global turbulence, the U.S. economy stood firm last year. From employers to consumers, the picture was one of surprising resilience.

This year may be shaping up as a more downbeat story. The economy is widely expected to decelerate steadily and to slip into a recession sometime this year.

Some early such signs could begin to emerge Thursday, when the Commerce Department will issue its first estimate of the economy’s performance in the first three months of 2023.

Forecasters have predicted that the gross domestic product — the broadest measure of economic output — grew at a 1.9% annual rate from January through March, according to a survey by the data firm FactSet. That would mark a significant slowdown from the 3.2% growth rate from July through September and the 2.6% rate from October through December.

The obstacles the economy faces are growing more troublesome. The biggest among them is the dramatically higher cost of borrowing. The Federal Reserve, in its fight against an inflation rate that last year hit a four-decade high, has raised its benchmark rate nine times in just over a year.

As those higher rates spread through the economy, it is becoming steadily more expensive for consumers and businesses to borrow and spend. The cost of a loan to buy a house or a car or to expand a business can become prohibitively expensive.

Many economists say the cumulative impact of the Fed’s rate hikes has yet to be fully felt. Yet the central bank’s policymakers are aiming for a so-called soft landing: Cooling growth enough to curb inflation yet not so much as to send the world’s largest economy tumbling into a recession.

There is widespread skepticism that the Fed will succeed. An economic model used by the Conference Board, a business research group, puts the probability of a U.S. recession over the next year at 99%.

The Conference Board’s recession-probability gauge had hung around zero from September 2020, as the economy rebounded explosively from the COVID-19 recession, until March 2022, when the Fed started raising rates to fight inflation.

Already, higher rates have clobbered the housing market, which depends on the ability of buyers to take out long-term mortgages. Investment in housing plummeted at an annual rate of 27% from July through September and 25% from October through December.

Consumers, whose spending accounts for roughly 70% of U.S. economic output, seem to be starting to feel the chill. Retail sales had enjoyed a strong start in January, aided by warmer-than-expected weather and bigger Social Security checks. But in February and again in March, retail sales tumbled.

“The U.S. economy is unwell, and it’s starting to show,’’ said Gregory Daco, chief economist at the consulting firm EY.

Tumult in the banking sector — the United States endured its second- and third-biggest bank failures ever last month — poses another threat. After depositors yanked money out of troubled Silicon Valley Bank and Signature Bank, forcing regulators to shut them down, many banks are cutting back on lending to conserve money to handle potential bank runs.

The worst fears of a 2008-style financial crisis have eased over the past month. But lingering credit cutbacks, which were mentioned in the Fed’s survey this month of regional economies, is likely to hobble growth.

“We place a roughly 55%-60% chance of a mild recession in the U.S.,” Tony Roth, Wilmington Trust’s chief investment officer, said in a research note. “Recent bank stress has subsided, but the risk of tighter financial conditions increases these recession risks.’’

Political risks are growing, too. Congressional Republicans are threatening to let the federal government default on its debts, by refusing to raise the statutory limit on what it can borrow, if Democrats and President Joe Biden fail to agree to spending restrictions and cuts. A first-ever default on the federal debt would shatter the market for U.S. Treasurys — the world’s biggest — and possibly cause a global financial crisis.

The global backdrop is looking bleaker, too. The International Monetary Fund this month downgraded its forecast for worldwide economic growth, citing rising interest rates around the world, financial uncertainty and chronic inflation. American exporters could suffer as a consequence.

Still, the U.S. economy has surprised before. Recession fears rose early last year after GDP had shrunk for two straight quarters. But the economy roared back in the second half of 2022, powered by surprisingly sturdy consumer spending.

A strong job market has given Americans the confidence and financial wherewithal to keep shopping: 2021 and 2022 were the two best years for job creation on record. And hiring has remained strong so far this year, though it has decelerated from January to February and then to March.

The jobs report for April, which the government will issue on May 5, is expected to show that employers added a decent but still-lower total of 185,000 jobs this month, according to a survey of forecasters by FactSet.

National News

Associated Press

Bill allowing doctor-assisted suicide in Delaware fails in Senate

DOVER, Del. (AP) — A bill allowing doctor-assisted suicide in Delaware failed to win approval in the state Senate on Thursday after narrowly clearing the House earlier this year, but it could come back next week. The legislation failed in the Democrat-led Senate in a 9-9 tie after three members of the Democratic caucus spoke […]

1 hour ago

Associated Press

Amtrak trains suspended from Philadelphia to New Haven by circuit breaker malfunction

NEW YORK (AP) — Amtrak trains were temporarily suspended Thursday afternoon from Philadelphia to New Haven, Connecticut, by a circuit breaker malfunction, the national rail service said. The technical issue led to a widespread loss of power on the tracks between Penn Station in New York City and Union Station in Newark, New Jersey at […]

2 hours ago

Associated Press

Witnesses say Ohio man demanded Jeep before he stabbed couple at a Nebraska interstate rest area

GRAND ISLAND, Neb. (AP) — Witnesses say they heard an Ohio man demand the keys to a Jeep that was being towed behind a Missouri couple’s RV before he brutally stabbed them both and killed the man at an Interstate 80 rest area. James Thompson Jr., 22, was formally charged with first-degree murder and 10 […]

3 hours ago

Associated Press

FBI raids homes in Oakland, California, including one belonging to the city’s mayor

OAKLAND, Calif. (AP) — Federal authorities raided a home belonging to Oakland Mayor Sheng Thao early Thursday as part of a California investigation that included a search of at least two other houses, officials said. FBI agents carried boxes out of 80 Maiden Lane, a four-bedroom home that property records link to the first-term mayor, […]

3 hours ago

Associated Press

Roller coaster strikes and critically injures man in restricted area of Ohio theme park

CINCINNATI (AP) — A man who apparently entered a restricted area to retrieve his lost keys at a theme park in Ohio was critically injured when he was struck by a steel roller coaster, police and park officials said. The 38-year-old man appeared to have entered a fenced area at Kings Island Wednesday night, according […]

3 hours ago

Associated Press

FBI identifies serial rapist as person responsible for 1996 Shenandoah National Park killings

RICHMOND, Va. (AP) — Nearly three decades after two young women were found with their throats slashed in Virginia’s Shenandoah National Park, federal authorities announced Thursday that they have identified a convicted serial rapist from Ohio as the person they believe was responsible for the killings. The bodies of Julianne “Julie” Williams, 24, and her […]

3 hours ago

US economic growth likely slowed in January-March quarter