U.S. Economy At The Threshold of Recession, According To Decision Analyst's June Economic Index
Arlington, Texas—The Decision Analyst U.S. Economic Index dropped to 100 in June 2022, a 5-point decline from May 2022 and a 14-point drop from its recent peak in June/July/August 2021 of 114. The Index has been trending down for the past 12 months, a strong indicator signaling that the U.S. economy is in a recession now or on the cusp of a recession. Inflation is reducing consumers’ purchasing power, supply chain disruptions continue to negatively affect the U.S. economy, and the war in Ukraine and economic and accompanying sanctions are creating strong headwinds for the world economy. 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 since August 2021, indicating the presence of or a soon-to-start 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 the resulting 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 (contrary to classical economic theory). Inflation is especially damaging to 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,” according to 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,” said Thomas. “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,” he added.
“Planned future purchases (see graphs below) indicate that consumer spending intentions (roughly 70% of the U.S. economy) are starting to wane 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 are slowing their spending—and this might magnify any economic downturn. 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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