Last week we saw a very bad reading of the consumer feeling, elaborated by Michigan University. This indicator that serves as a predictor and attentive to the growth figures of U.S. GDP in the first quarter, there are many analysts who suggest that the country would already have entered recession, which means 2 consecutive quarters of negative growth.
Now, what happens to Fed, inflation and growth?
Let us see that the process of recalcending inflation, which was incubating for the effect of the monetary stimuli of the last decade, was accentuated as a result of the invasion of Russia to Ukraine and the closure of activities in China to combat the Covid.
In this scenario, inflation is running above 8% annually, being much above 2% of the famous EDF used as a reference to stimulate or cool the economy.
Much has been discussed if this is a temporary or structural process, and here lies the criticism of the slow drive of the EDF, which at the time saw the process as something conjunctural and did not act quickly.
But if we look at the recurring costs of a family, we see that consumers are feeling in their pocket a strong drop in the purchasing power of their salary. Items such as naphtha, electricity, transportation, food, etc. are coming with strong subas.
The interest rate suba, which has been transferred to mortgage loans, impacts potential housing buyers who cannot afford mortgage quotas and must rent, leading the income upwards.
All this is transferred so that consumers' pocket is smaller and therefore less difficult for global growth.
The US cannot long maintain the combination of negative interest rates, Treasury financing needs, rising inflation and huge liquidity pools.
This adds to the deceleration in Europe and China and a process of reversing globalization, which could impact the costs of final products.
Fortunately, technological advances allow us to improve processes and productivity and reduce costs.
Another patient is the good level of employment in the United States with firm demand.
But the challenge that comes is enormous: Can Fed remove the stimuli (rate and liquidity) without leading the economy to a recession? In any case, can it be a soft recession?
And the last reflection, if we do not get a smooth landing of the economy, will we be in the presence of a stagnation, recession or depression?
In this context of uncertainty, entrepreneurs must decide how much and when they invest, whether they hire staff or reduce planting, whether they invest in new technologies or launch new projects or open international markets.
And always with an eye looking if Russia one day cuts gas supply to Germany.
In this context, investors must decide where to put their savings. It is not surprising that, despite increasing inflation, many park in cash until they clarify the panorama.
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