The US Economy is on the Edge, What Will Push It Over?
According to a BBC article, the US economy grew at a 2.2% annualized rate for the first quarter of 2018, versus an expected 2.3%. This was not completely unexpected, as first quarters have been the softest numbers in the quarterly tallies for the past 15 years. However, what was unexpected was the weakness in consumer spending, which was the lowest value in the last five years.
UBS is predicting a recession if oil prices reach $100 per barrel. This is because, out of the last six recessions, five of them occurred after a spike in oil prices. As of now, oil prices are around the $70 per barrel range. However, any number of events could cause that number to rise significantly. There is the threat of international conflict on several fronts, the lack of investment in oil production due to low prices (which significantly delays additional oil production), the collusion of Russia and Mideast abnormally low output levels, and other causes.
Goldman Sachs is raising alarms over the Federal debt and predicting the debt could be greater than US GDP within 10 years. This will cause higher interest rates, which will cause higher debt levels because of servicing the debt. They further state that concerns regarding the debt level with constrain attempts to provide relief with fiscal stimulus during the next recession, which could prolong the recession or make it worse.