The US economy slows down, Europe is at risk of recession and Russia has a double-digit decline
![The US economy slows down, Europe is at risk of recession and Russia has a double-digit decline](https://news7g.com/wp-content/uploads/2022/03/107025494-1646419786859-gettyimages-1379165768-032a9981_b796d09b-b4ae-45ed-8eba-d4f4b4383c8b-780x470.jpeg)
A Lukoil gas station employee pumps gasoline into a customer’s car on March 4, 2022 in the Canarsie neighborhood of Brooklyn, New York City.
Michael M. Santiago | beautiful pictures
In their first assessment of the economic impact of the invasion of Ukraine, forecasters say that the US will grow more slowly with higher inflation, the European economy will be closer to recession and Russia will fall into recession. deep, double-digit drop.
The Quick Updates CNBC, the average of 14 forecasts for the US economy, shows GDP growth of 3.2% this year, slightly down 0.3% from February forecast, but still growing above trend as the US continues recovering from the degradation of Omicron. Inflation for personal consumption spending, the Fed’s preferred gauge, is expected to grow 4.3% this year, 0.7 percentage points higher than the previous survey in February.
Forecasters warn, however, that much remains unknown about how the US economy will respond to an oil shock that causes crude prices to rise rapidly. over $126 a barrel and National average gas price over $4 a gallon. Most of their forecasts see risks tilted towards higher inflation and lower growth.
The complete removal of Russian oil from global supply could mean a much worse outcome, economists say.
“…The consequences of Russia completely shutting down 4.3 (million bpd) of oil exports to the US and Europe will be dramatic,” JPMorgan wrote over the weekend. period – and would therefore cause a shock to global growth.”
A quick CNBC update showed that US growth accelerated to 3.5% in the second quarter from 1.9% in the first quarter. But that second-quarter estimate is down 0.8 percentage points from the previous survey. So the economy is still seen as recovering from the omicron wave, but not as strongly as inflation occurred to a larger fraction.
Inflation estimates are 1.7 percentage points higher for this quarter and 1.6 percentage points for the next. Inflation is expected to fall from 4.3% this year to 2.4% by year-end.
In general, the US economic growth is considered to be sustainable.
“Energy prices are surging and likely to remain consistently higher, but I would expect much of the upside momentum in recent days to subside within a few months, which means capitalism,” said economist Stephen. The weak point is the short-term impact on growth and inflation”. Stanley, with Amherst Pierpont. “Consumers have great liquidity, income growth and wealth to attract.”
One factor that sets this price shock apart from elsewhere is the amount of oil the US produces. With U.S. production and demand at crude equilibrium, money moves from consumers to producers within the economy, not from the United States to foreigners. That would hit American homes and certain parts of the country harder, but boost the profits of American energy companies.
In contrast, oil companies will likely fuel growth by using profits to increase drilling.
However, some are pessimistic that the drag from higher prices will lead to greater drag on US growth. “The US is on the cusp of recessionary inflation, with energy and food prices now likely to move significantly higher,” said Joseph Lavorgna of Natixis.
Europe has been hit harder
Most agree that the effect will be worse in Europe.
Barclays has lowered its growth forecast for Europe this year to 3.5% from 4.1% last month.
“Shooting commodity prices and risk aversion in financial markets were the main contagion channels, hinting at a global inflation shock, with Europe being the most vulnerable region,” the investment bank said. riskiest”.
JPMorgan has accounted for almost entirely a percentage of Europe’s growth this year and now forecasts GDP to grow 3.2%. But the second quarter was filled with zero.
Russia is expected to be hardest hit. JPMorgan forecasts GDP will shrink 12.5% as the country’s economy faces the weight of unprecedented sanctions that have frozen $630 billion in foreign exchange reserves and cut off the country’s economy with the rest of the world.
The Institute of International Finance found a 15% decline, double the decline since the global financial crisis. “We see risks tilted to the downside. Russia will never be the same,” wrote IIF Chief Economist Robin Brooks.