Ding Gang: Be careful! Dark clouds are gathering over the U.S. economy and a storm may form
2024-08-03
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Editor’s Note:August 2,Senior Researcher at Chongyang Institute for Financial Studies, Renmin University of China, Senior Reporter at People's DailyDing GangIn a commentary published on the WeChat public account "Ding Gang Sees the World", it was pointed out that the US economy is performing poorly.It has triggered a sharp drop in the stock market.The manufacturing industry continues to shrink, unemployment hits a new high, and inflation suppresses consumption.Once the U.S. economyGathering dark clouds formThe global supply chain will be disrupted.The stability of global financial markets will also be affected.The US economic downturn may also bring some favorable factors, such asFed cuts rates。Chinese companies need to continue to pay attentionThe U.S. economic situation andStrengthen economic and trade cooperation with other countries to ensure security.The article is now forwarded as follows:
The dark clouds gathering over the U.S. economy are growing darker and darker, triggering a sharp drop in the stock market.Will there be a violent storm?？At a time when the U.S. economy needs emergency help the most and the election has entered a period of fierce competition, it is really difficult for the Federal Reserve to figure out how to "prescribe medicine"!Moreover, global geopolitics is undergoing dramatic changes.Will the conflict between Russia and Ukraine escalate? Will a war break out in the Middle East? Will the United States, the world's largest economy, intensify its containment policy against China, the second largest economy?Let’s first look at the U.S. manufacturing industry, which is one of the barometers of the economy.The ISM manufacturing PMI data showed thatThe manufacturing sector has been in contraction since May this year.Manufacturing activities have decreased, orders and output have fallen, and corporate confidence is insufficient. The weakness of the manufacturing industry will not only affect employment, but also affect the entire supply chain and industrial chain.The U.S. job market has recovered somewhat after the epidemic, but recent data show thatThe number of first-time applications for unemployment benefits in the United States increased by 14,000 to 249,000 in the week ending July 27, which was not only higher than economists' expectations but also the highest level in nearly a year.The number of people continuing to receive unemployment benefits also increased to 1.877 million, the highest level since November 2021.The labor market is weakening, with companies cutting back on hiring or increasing layoffs.The Federal Reserve's high interest rate policy has had a significant impact on the economy.High interest rates increase borrowing costs for businesses and consumers, discouraging investment and consumption. Although the Federal Reserve may begin to cut interest rates later this year, the current high interest rate environment has already put pressure on the economy, and it will take time to digest these pressures.Wage growth has slowed, and inflation remains a problem.December 2020McDonald'sThe average price of a Big Mac has risen to $4.89. The most recent Big Mac index, from January, showed the average price of a Big Mac was $5.69.High prices have weakened consumers' purchasing power and affected consumer spending. The reduction in consumption behaviors such as dining out reflects consumers' cautious attitude in the high-price environment.The consumption effect stimulated by large subsidies during the epidemic is disappearing.The United States is one of the world's largest consumer markets, and its economic downturn will directly affect global trade.Once the storm forms, exports of major trading partners such as China and the European Union will be hit, and the global supply chain will be disrupted.Especially for export-dependent economies, the reduction in US demand will have significant negative impacts, especially on social stability. This includesIn recent years, some countries that have undertaken the transfer of factories from China, such as Mexico, Vietnam, and India, will become more unstable in the internal society and politics of some countries, and the risk of regional conflicts will increase.U.S. economic data and policy changes will affect the stability of global financial markets.High interest rates have led to a sustained outflow of capital from emerging markets, with no reversal in sight.The slowdown of the US economy will drag down global economic growth. As one of the engines of the global economy, if the US economy continues to decline, global economic growth expectations will also be lowered, affecting the economic policies and market expectations of various countries.The United States is one of China's largest trading partners, and the US economic downturn will continue to affect China's exports to the United States.It is impossible for the United States to change its trade war with China in the short term. Some American scholars predict that there is an 83% probability that this "state of war" will continue after 2025.The reduction in orders will increase domestic demand in Chinacompetition, affecting corporate profits and employment.For small and medium-sized enterprises that have been exporting to the United States for a long time, finding new export markets will also become more difficult.Due to increased tariffs and supply chain adjustments, the cost of China's export goods will rise, which may be transmitted to the domestic market, leading toImported inflation pressure increasesRising production costs will also further affect corporate profits and economic growth.As the US economy slows down and the trade war continues, many US companies may continue to adjust their supply chains to reduce their reliance on China. Such adjustments will continue to shift to countries such as Mexico, Vietnam, and India, disrupting the global supply chain and industrial chain for a long time.Although the US economic downturn has many negative impacts on the Chinese economy, there are also some favorable factors.Chinese companies will continue to work hardStrengthen economic and trade cooperation with other countries, reconstruct the industrial chain and supply chain to reduce dependence on the US market, but this process will be more bumpy and difficult.As a result, the United States will lack more sufficient market and industrial power to support a comprehensive containment of China.High-endThe "alliance" of the technology industry chain will increasingly reveal cracks and will find it difficult to gain full support from relevant countries due to conflicts of interest.also,U.S. economic slowdown could lead to Fed rate cuts, which will ease pressure on global financial markets and may have a positive impact on China's capital flows and monetary policy.What we need to pay more attention to is that the slowdown in the US economy will have a significant impact on the global geopolitics that are undergoing profound changes.From one perspective, this will affect the US hegemony to a certain extent. But at present, it mainly weakens the execution of its hegemony. Once the new president adopts a contractionary policy, it may affect the US's involvement in relevant regional hot spots and its security control.However, on the other hand, the United States may take more protectionist measures to protect its own economy and employment, which will lead to intensified global trade frictions and affect the stability of the international trade system.The downturn in the US economy will have a significant impact on the global economy and the Chinese economy, mainly in terms of trade, financial markets and economic growth. Although there are some favorable factors, overall, the negative impact is more worthy of our attention.
