Recession has hit some of the world's major economies. America is exceeding expectations

NEW YORK (AP) — As some of the world's largest economies stumble into recession, the United States continues to stumble.

Both Japan And this United Kingdom It said on Thursday that their economies may have weakened in the final three months of 2023. It will be the second straight quarter for each, which fits one definition of a recession.

Yet in America, the economy It advanced in the fourth quarter of last year for the sixth consecutive quarter of growth. That beat many predictions last year that a recession was inevitable, with high interest rates slowing the economy and inflation.

Give more credit to American households that have continued to spend at solid rates despite many challenges. Their spending makes up a large part of the US economy. While government stimulus helped families weather the early stages of the pandemic and moderated the rise in inflation, rising wages are now helping them catch up with higher prices for the goods and services they need.

On Thursday, a report showed that fewer US workers applied for unemployment benefits last week. Its The latest signal of a remarkably firm job market, although layoff announcements have recently attracted attention. Continued strength there will help prop up the economy.

Of course, risks still loom, and economists say a recession cannot be ruled out. Inflation may rise again. Worries about the U.S. government borrowing too much could roil financial markets, eventually making it more expensive to borrow money to buy cars and other goods. The mounting losses associated with commercial real estate can mean huge pain to the financial system.

But for now, the outlook continues to look better for the US than for many major economies. The mood on Wall Street was more positive, with the S&P 500 index, the main gauge of the US stock market, hitting the 5,000 level for the first time last week.

According to Solita Marcelli, Americas Chief Investment Officer at UBS Global Wealth Management, „First and foremost, it is important to emphasize that market performance is a reflection of a thriving economy rather than unwanted 'animal spirits' from investors.

When it upgraded its forecast for global growth in 2024 a few weeks ago, the International Monetary Fund cited a stronger-than-expected slowdown in the US economy as a key reason.

Analysts say several unique characteristics of the U.S. economy have sheltered it from recessionary storms. The U.S. government provided about $5 trillion in pandemic aid in 2020-2021, far more than those abroad, which put most households in much better financial shape and well supported consumer spending in 2023.

The Biden administration has subsidized the construction of manufacturing plants and infrastructure through additional legislation passed in 2021 and 2022 that also had an impact last year. A quarter of the US economy's solid 2.5% growth in 2023 will come from government spending. Republican critics, however, blame the extended spending for contributing to high inflation.

„We had some policies that I think helped us a lot,” said Diane Swank, chief economist at KPMG. „But the structure of our economy is also very different.”

Americans are better protected from rising rates than their UK counterparts, for example, as most US homeowners with mortgages have long, 30-year fixed payments. As a result, the Federal Reserve's rapid rate hikes over the past two years — which have raised mortgage rates from about 3% to about 6.7% — have had little impact on many American homeowners.

Yet their British counterparts carry mortgages that have to be renewed every two to five years. They struggled with rapidly rising mortgage rates as the Bank of England raised borrowing costs to combat inflation.

Catherine Mann, a member of the Bank of England's interest rate-setting committee, said on Thursday that the slowdown in the UK economy should be temporary. He added that there are already signs of economic recovery in business surveys.

„The data we have today is the rear-view mirror,” he said on the sidelines of an economic conference in Washington. Forward-Looking Statements „All is well.” Like the Central Bank, the Bank of England is also considering Reduces its benchmark rate If inflation is believed to be under control.

Another benefit for the United States is that immigration has increased in recent years, making it easier for businesses to fill jobs, expand their operations, and lead to more people getting paid — and then spending that income.

Japan, by contrast, is aging rapidly and has seen its population shrink over the years because it has less access to foreign workers. Depopulation can act as a powerful drag on economic growth.

In Europe, consumer sentiment remains weak among consumers still feeling the effects of high energy prices caused by the war in Ukraine.

China, which is experiencing faster economic growth than the United States, is also under severe pressure. Its stock markets have been among the worst in the world recently due to a sluggish economic recovery and problems in the property sector.

The US economy faces its own challenges. Growth is forecast to cool this year as large increases in Federal Reserve interest rates work their way through the system.

A statement on Thursday may have endorsed that. Sales US retailers slump December to January will be higher than economists expected.

Some of the pillars supporting consumer spending may weaken. Student loan repayments have resumed, consumers have largely spent their pandemic stimulus money and credit card balances are high.

It can be very frustrating that the prices of goods in the market are still higher than before the pandemic. Low inflation means prices are rising less quickly from here on out, not that they're falling back to where they were.

Coping with inflation is a top concern for U.S. consumers, except for those earning more than $150,000, according to a recent survey by Morgan Stanley.

When McDonald's CEO Chris Kempczinski discussed his company's latest quarterly results, he said he hasn't seen much of a change in behavior among middle- and upper-income customers. But „where you see the pressure with the American consumer is the lower-income consumer, so let's call it $45,000 and under. That consumer is being pressured.

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Rugaber reported from Washington.