U.S. Economic Prospects Are At A Tipping Point, According To Decision Analyst's May Economic Index
Arlington, Texas—The Decision Analyst U.S. Economic Index stood at 105 in May 2022, a 9-point decline from its recent peak in July 2021 at 114. The Index has been trending downward for the past 10 months, a growing indicator of possible recession. Inflation is reducing consumers’ purchasing power. Supply-chain disruptions continue to negatively affect the economy. The war in Ukraine and economic sanctions are creating headwinds for the world economy. Thus, the Index is signaling the possible onset of a recession in 2022. The Index tends to be a leading indicator of future economic activity. The past-20-year history of the Index is shown below.
“The U.S. Economic Index has been falling for 10 months now, indicating the possible start of a recession in 2022. The decline in the Index over the past 10 months has been driven primarily by high and rising inflation, supply-chain disruptions, and more recently, by the Russian invasion of Ukraine and related disruptions to economic flows across the world. High inflation rates reduce consumers’ purchasing power and encourage them to postpone major purchases in the hopes that prices might be lower in the future. Inflation is especially punishing for lower-income households, because so much of those households’ budgets are taken up by food, gasoline, transportation, and housing costs—where prices have increased rapidly,” said Jerry W. Thomas, President/CEO of Decision Analyst .
“High inflation rates might moderate somewhat as 2022 unfolds, especially if the Federal Reserve continues to raise interest rates and to reverse quantitative-easing. The Russian invasion of Ukraine will be a major drag on the world economy (and the U.S. economy) for the balance of 2022 and into 2023, as economic sanctions hurt all countries. . “A longer-term threat to the economy is the likelihood that many assets and investments purchased at inflated prices could be underwater within the next year or two as interest rates go up,” observed Thomas.
Planned future purchases (see graphs below) indicate that consumer spending intentions (roughly 70% of the U.S. economy) are strong, but starting to waver in some sectors. The graphs below show the percentages of U.S. households that say they are likely to make various types of purchases in the next 12 months.
“Overall, future purchase intentions suggest consumers hope to keep spending their money—and this might cushion the economic downturn to some degree, but the overall risks to the U.S. economy are substantial,” said Thomas.
The Decision Analyst Economic Index is based on a monthly online survey of several thousand households balanced by gender, age, and geography. The scientific survey is conducted in the last 10 days of each month. The Economic Index is calculated from 9 different economic measurements using a sophisticated econometric model. The result is a snapshot of coming economic activity in each country surveyed, as seen through the eyes of representative consumers living in the respective countries.
Decision Analyst conducts its concurrent economic surveys each month in Argentina, Brazil, Canada, Chile, Colombia, France, Germany, India, Italy, Mexico, Peru, the Russian Federation, Spain, and the United States. Whenever the Decision Analyst Economic Index is greater than 110, it tends to signal an expanding economy. An Index value of 90 to 110 suggests a no-growth or slow-growth economy, and near or below 90 generally indicates economic contraction. These guidelines vary by country, however.
About Decision Analyst
Decision Analyst (www.decisionanalyst.com) is a global marketing research and analytical consulting firm specializing in strategy research, new product development, advertising testing, and advanced modeling for marketing decision optimization. For over 40 years, the firm has delivered competitive advantage to clients throughout the world in consumer-packaged goods, telecommunications, retail, technology, medical, and automotive industries.
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