Secretary of the Treasury Janet Yellen dismissed the possibility that the United States might enter into recession anytime soon while speaking at a press conference ahead of the Group of Seven (G-7) finance ministers meeting in Germany.
“We are in a global environment where there are significant risks and pressures, but I really don’t expect the United States to fall into a recession. I think Europe is perhaps a bit more, a bit more vulnerable and of course more exposed on the energy front than the United States is,” Yellen said during the May 18 press conference in response to a question as to whether the United States, Europe, and China could end up in some kind of synchronized recession.
Yellen refused to make a definite forecast but warned that the environment is filled with risks of potential slowdowns and inflation. The global economic outlook is “uncertain” and “challenging,” she said. Food and energy prices are increasing, creating “stagflation airy effects” like depressing spending and output while raising inflation worldwide.
In such circumstances, the United States is “best positioned” given the country’s strong labor market and economy, she added. Washington is doing “everything we can” to make sure that the global fallout of Russia’s war against Ukraine is kept to a minimum.
“Inflation clearly is a concern in many parts of the world, in the United States, in the UK, and in the rest of Europe as well,” she said.
The U.S. annual inflation rate in April, as measured by the Bureau of Labor Statistics’ Consumer Price Index (CPI), was at 8.3 percent. This was only slightly lower than the 40-year high of 8.5 percent recorded in March.
Moreover, the Producer Price Index (PPI), which measures inflation before it hits consumers, rose by an annual rate of 11 percent in April. This suggests more consumer inflation in the near term.
“With the annual rate ticking down from 8.5 percent to 8.3 percent, it can be tempting to say we’ve seen the peak, but we’ve also been head-faked before as was the case last August,” Bankrate Chief Financial Analyst Greg McBride told The Epoch Times.
Yellen’s dismissal of a potential recession in America follows a Commerce Department report released last month stating that U.S. GDP fell at a 1.4 percent annualized rate in the first quarter of 2022. In Q4, 2021, GDP growth was at 6.9 percent.
On the positive side, manufacturing output grew by 5 percent during the first quarter while creating 1.7 million jobs.
“The economy is still showing some resilience, but the first-quarter GDP report signals the start of more moderate growth this year and next, largely in response to higher interest rates,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto, Reuters reported.
Wells Fargo is predicting a mild recession in the United States by the end of this year and the beginning of 2023. There is a 25 percent chance of a recession within the next 12 months, the bank estimates, according to the outlet.
Goldman Sachs predicts a 15 percent recession risk for the next year and a 35 percent chance for the next two years.