[Asia Economy New York=Special Correspondent Joselgina] "Inventory is a big problem."
Known to Korean investors as the so-called 'Money Tree Sister,' Cathie Wood, CEO of ARK Investment, identified corporate inventory as the biggest risk and claimed that the U.S. economy has already fallen into a recession. As pessimism about economic growth spreads, the U.S. Consumer Confidence Index for June dropped to its lowest level in 16 months.
◇Money Tree Sister points out inventory... indicators worsen
On the 28th (local time), Wood appeared on CNBC's Squawk Box and said, "I think we are already in a recession," adding, "(Corporate) inventory is a big problem. I have never seen inventory increase this much in my 45 years of experience."
She also admitted to underestimating the severity and persistence of inflation. She said, "I can't believe the supply chain disruption has lasted more than two years. Russia's invasion of Ukraine was also unprecedented," diagnosing that "inflation became a bigger problem and led to deflation."
Recently, U.S. inflation has reached its highest level in about 41 years. Larry Summers, former Treasury Secretary who has repeatedly warned of recessions, also recently expressed concern that "there is a 60-40 chance of returning to a kind of long-term recession."
This pessimism about the economy is being reflected in economic indicators. The Conference Board, a U.S. economic research organization, announced that the U.S. Consumer Confidence Index for June was 98.7, sharply down from 103.2 in the previous month. This is the lowest level since 95.2 recorded in February 2021. The Associated Press evaluated this result as indicating that Americans are pessimistic about the future due to prolonged inflation and rising interest rates.
In particular, the expectations index, which reflects economic outlook for the next six months, plunged from 73.7 last month to 66.4 this month, the lowest since March 2013. Signs of a slowdown in the housing market’s price rise are also confirmed due to the impact of interest rate hikes in the previously overheated housing market.
◇UBS: Not stagflation but slowflation
On the other hand, there are many rebuttals centered on the Federal Reserve (Fed), the central bank, that the possibility of entering a recession is low.
John Williams, President of the New York Federal Reserve Bank, appeared on CNBC that day and said, "The U.S. economy is strong," adding, "Growth is expected to slow down quite a bit compared to last year, but this is not a recession." He emphasized, "This is a necessary economic slowdown to reduce inflationary pressures and lower inflation."
On the same day, Mary Daly, President of the San Francisco Federal Reserve Bank, also drew a line during an online event, saying that "the unemployment rate will rise somewhat" due to the Fed's rate hikes, but "a recession is not expected."
Investment bank UBS said in a report that day that the U.S. could enter slowflation, not stagflation, over the next 12 to 36 months. Slowflation refers to a situation with relatively lower recession severity compared to the low-growth, high-inflation conditions of the 1970s.
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