JPMorgan Chase slashes U.S. growth forecast as consumers limit spending
JPMorgan Chase revised its U.S. growth outlook mid-year, sharply lowering expectations for second-quarter annualized real GDP growth to 1% from 2.5%, Bloomberg reported on Friday.
The largest US bank also cut its projection for the third quarter to 1% from 2%. However, growth is expected to reach 1.5% in the last three months of the year, boosted by robust auto production and lower inflation, JPMorgan analysts said.
The downgrade comes amid tighter monetary policy, as the US Federal Reserve responds to inflation with aggressive interest rate hikes. The Fed raised its key rate by 0.75 percentage points in June.
The grim forecast followed an influx of weaker data earlier this week that showed US consumer spending rose less than expected in May as motor vehicles remained scarce. Meanwhile, rising prices forced to reduce purchases of other goods.
US stocks are off to their worst start in over 50 years
“Our forecast is dangerously close to a recession”, Michael Feroli, JPMorgan’s chief US economist, said in a note seen by the agency.
“However, we continue to seek economic expansion, in part because we believe employers may be reluctant to lay off workers, even in times of weak product demand.”
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