The tag “Hegemony” that has been associated with the US pretty much explains itself since the US is known to have the strongest economy. After the disintegration of the USSR, the US ruled over its world with its liberal capitalist model of economy. The economy has been stagnant for more than a decade. However, significant economic changes are turning heads. There are 5 keys signs mentioned below to know what lies beneath the superficial strong economy of the US.
- Wrestling Manufacturers
The centre of President Trump’s economic vision is the manufacture of jobs. However, earlier this year, the ISM manufacturing index dropped from 52.8 in April to 52.1 in May. Though the number above 50 suggests manufacturing businesses are expanding, the commentator has pointed out that the reading in May was the lowest level in the Trump presidency. The Empire State Manufacturing Index’s record is shocking weak which was posted on 18th June.
- Wary Consumers
One of the economy’s strongest pillars is the bullish U.S. consumers. However, cracks have started to come into appearance. The Conference Board had revealed that the index had reduced to 121.5 which is the lowest recorded in nearly 2 years. Consumers are spending less since they think that the economy is weak and business owners won’t hire people because they too have the same thinking as the consumers.
- Topsy-turvy bond market
The bond market is showing signals of decline. Yields are slipping down below the short-dated Treasurys which in turn suggests the fixed-income investors consider the delay in growth and inflation in years to come. Also known as a yield curve inversion, the event made headlines for a week when it first happened in the month of March. But the indicator showed that in a year or two recession could take place. However, when it again happened in May, the yield curve inverted. It lasted for more than a month making it harder to write off.
- Tightening of financial conditions due to trade wars
During the late Aug, the S&P 500 has fallen to as much as 5% in the trading, which is, however, still down by 3 per cent as of trading on Wednesday. After fresh escalation in US-China trade, the markets took a beating. However, they’ve already started showing signs of decline since July. All this happened after investors battled to interpret comments of Fed Chair Jerome Powell. Financial conditions have become more crucial these days. Keeping aside housing and tech, financial conditions are detrimental.
- Softening home prices
Here’s good news for people trying to buy a new house in the US. The real estate market has drastically declined over the past few months. S&P CoreLogic Case-Shiller index showed 3.5% growth in the US home prices year over year in April. In seven years, it is the slowest growth rate recorded yet. Zillow’s compilation of home values has declined between March and April. If the recession continues like this, this would be bad news.