The United States, inflation began to affect: moderate impact, but stagnation elusive

Milan (Finanza.com)

The economic worries that have surrounded Europe and China in recent months are now poised to reach the US as well. Last week, results from major US consumer companies (such as Target, Walmart, and Kohl) indicate that inflation has taken a hit on consumers. The Algebris report analyzes the problem.

The numbers show a significant loss of turnover and a move away from higher-margin items, indicating a certain difficulty for companies to pass on higher costs to consumers. Likewise, major economic indicators in many US states have started to deteriorate significantly.

The US economy saw the biggest contraction in average growth over the past month, with expectations rising from 3% to 2.7% for 2022 in the past week. High inflation began to hurt real incomes, even as wage growth increased slightly. Thus, a slowdown in inflation towards levels closer to 5% would mitigate its impact on consumers. Consumer net worth also remained very high compared to the previous slowdown.

Overall, Algebris notes that hyperinflation is causing a slowdown while he believes the impact on consumers’ balance sheets will be moderate over the next 12 months and that the US will stay away from recessionary levels. The Fed will likely continue to monitor the recent deterioration in the data and keep its focus firmly on inflation.

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