Phil Suttle on US Recession Risks, AI Impact, and BoJ to 1%
Sep 15, 2023
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Phil Suttle, founder of Suttle Economics, discusses US recession risks, AI impact, surprise factory building, Euro-area and UK outlook, US inflation forecast and Fed's response, China's weak housing market, and the future of central bankers.
The US economy has shown resilience and can withstand higher interest rates better than previously thought.
Rising interest rates and the resumption of student debt payments may pose a drag on consumer spending in the future.
Deep dives
The US economy is stronger than expected
The US economy has proven to be stronger than expected, with forecasts for a recession being proved wrong. The resilience of the economy, particularly the consumer sector, has been surprising, and it suggests that the economy can withstand higher interest rates better than previously thought.
Consumer spending remains strong in the face of rising interest rates
Despite rising interest rates, consumer spending in the US has remained strong. Solid income growth and lower gasoline prices have contributed to this trend. Additionally, the temporary relief from student debt payments has provided some relief for consumers. However, higher interest rates and the resumption of student debt payments may pose a drag on consumer spending in the future.
US labor market shows signs of deceleration
The US labor market is showing signs of deceleration, with indicators like payrolls and job openings on a downward trend. While the labor market has not yet entered a recession, the tightening of monetary policy is expected to have a negative impact on the job market in the coming years.
Fiscal policy and investment cycle in the US
Fiscal policy in the US has been expansionary, but there are uncertainties about the impact of increased deficit and shifting spending levels on the economy. The investment cycle in the US has shown mixed results, with sectors like housing performing better than business equipment investment. However, the overall investment landscape is expected to face challenges in the future, including the exhaustion of excess savings and a decline in production in certain sectors.
Phil is the founder of Suttle Economics – a leading research consultancy. Before that, he held senior roles at Tudor, the Institute of International Finance (IIF), JP Morgan, Barclays, the New York Fed and World Bank. He was educated at Oxford University and lives in the US. In the podcast, we talk about what will cause a recession, surprise factory building, view on Euro-area and UK, and much more.