Big banks and technology giants in the United States have been preparing for months to accelerate the consequences of the Joe Biden administration’s economic policies in 2023.
The signs are becoming clearer with each passing week as to what 2023 will look like for Americans. If 2021 and 2022 were difficult, the present looks worse, according to economic indicators and forecasts from the business and financial sector.
The impact of the interest rate hike by the Federal Reserve to control the highest inflation in the United States of America (USA) in the last five decades should be felt more strongly in the coming months.
a 2022 prelude
From November onwards, the economy which had shown resistance due to its solid foundation started showing signs of general breakdown.
massive layoffs by large technology conglomerates, which put 50,000 people out of work in just one month; fall in industrial production and contraction of manufacturing for months; The slump in retail sales in November and December (the golden time of the year) appears to be the peak of the dire situation since the majority of Americans arrived, with almost all sectors showing lower consumption. Washington of the Biden administration.
As expected, despite year-end celebrations and promotions, retail sales were down more than 8% compared to the same period last year.
The National Retail Federation said Christmas sales rose only 5.3% in November and December, far below expectations and a dramatic decline compared to the 2021 holiday season, when growth was 13.5%.
The total amount spent in December increased to $677.1 billion, down 1.1% from November, which also had negative data.
And although the cost of gasoline, cars and homes for sale fell, other products—such as food—continued their unstoppable growth.
The price of food rose 0.4% in December, while the price of gasoline declined 4.5%, a factor that most directly affected inflation, which now stands at 6.5%, up from 9.1% in June, according to the Federal Reserve.
Meat, sausage and eggs had the biggest increase in December.
For this reason, some economists disagree with the current inflation level and believe that the data does not agree with reality. And that’s exactly what major US banks are seeing, facing a strong financial crackdown. [durante dos años] of millions of American families.
“The resilience that consumers have shown is showing cracks in 2022, as prices are higher and interest rates are higher. Moody’s Vice President Mickey Chadha said, the uncertainty in the macroeconomic environment is finally taking its toll.
Moody’s agency predicts that consumers will be increasingly “selective” in their spending during the first half of the year.
Loretta Mester, a US Central Bank official, said more rate hikes are needed in 2023 to definitively defeat the highest inflation the United States has seen in five decades. His comments are in line with those of Fed Chairman Jerome Powell.
By how much, and for how long, the bank will raise its reference rate will depend on the impact the measure has on the US economy. Currently, the reference rate stands at 4.25% and 4.50%, which is its highest level in 15 years.
All of the above are accompanied by massive layoffs in the United States by technology companies including Intel (+20,000), Tesla (10% of its workforce), Amazon (+18,000), Microsoft (+10,000), Meta (+) 12,000) Salesforce (about 8,000), Lyft (13% of their administrative staff), Twitter (about 4,000). Alphabet (Google Matrix, +12,000, 6%). Apple halted all hiring without ruling out layoffs in the first or second quarter.
The list includes more than 18 large companies, without adding estimates for retail chains, pharmacies and supermarkets.
For its part, the real estate sector has experienced 11 consecutive months of declining sales, with a decrease of 17.8% in 2022 (the worst record since 2014).
The automotive sector has not been able to come out of the crisis of parts and labor shortage and low sales in manufacturing. Analysts believe that it will be very difficult to change the situation in 2023.
Faced with a sharp downturn in the US economy and fears of a possible wave of loan defaults, the country’s big banks have increased their reserves and are studying credit facilities that in the past allowed quick and direct access to millions of customers .
loss banks They prepare the ground to face the situation that their customers cannot pay their debts. For this reason, JPMorgan Chase has $1.4 billion, Citigroup $640 million, Bank of America $403 million, and Wells Fargo $397 million ready.
In the final quarter of the year, big US banks posted juicy profits, benefiting in part from a rise in the cost of debt due to seven interest rate hikes by the central bank to control inflation. In some cases, net income was much lower than the same period in 2021.
Fourth-quarter net profit rose 6% to $11 billion for JPMorgan and 2% to $6.9 billion for Bank of America.
Instead, it fell 21% ($2.5 billion) for Citigroup and 50% ($2.9 billion) for Wells Fargo.
an unchanging landscape
US investment bank Goldman Sachs reported an unprecedented 69% drop in its profits in the fourth quarter of 2022 compared to the same period in 2021, mainly due to a decline in its advisory and wealth management business.
Billing fell 16% to $10.6 billion, and its net profit was just $1.2 billion in the quarter. To stem the impending wave of defaults, the bank tripled its money provisions.
A massive price hike in the US in 2021 and 2022 has led to a slowdown in manufacturing activity and industrial production, apart from a reduction in consumption indices, labor shortages, which still affect a large portion of companies across the country. Does ,
Manufacturing activity in the New York region, a benchmark for the country, suffered a sharp decline in January, another sign of an economic slowdown in the world’s leading power. From August onwards, manufacturing activity began to decline, even as that month saw the sharpest decline in its history.
The index fell 22 points from December to -32.9, according to the monthly Empire State survey published by the New York Federal Reserve and conducted among manufacturers in the region. Data below 50% represents a contraction, so the current record has triggered the alarm.
Industrial production in the US fell again 0.7% in December, more than experts expected, according to data from the Federal Reserve in Washington DC. Analysts had expected 0.1%.
“The industry continues to face a number of headwinds, notably weak demand, even as supply issues have eased,” said Rubella Farooqui, chief US economist at High Frequency Economics (HFE).
Factories began to slow significantly in response to lower demand in the context of rising interest rates, Farooqui said.
Pantheon Macroeconomics economist Kieran Clancy said current data on the US economy “puts consumption in a difficult position through early 2023. In fact, the uncertain economic environment has resulted in consumers continuing to reduce their non-essential spending.” ” Added.
It’s a reality that big American companies and major banks have watched for months, a path that worsens the cynical economic policies of the current government in Washington.