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US headed to severe recession: American economist

Tuesday, 26 July 2022 3:35 PM [ Last Update: Tuesday, 26 July 2022 4:24 PM ]

Renowned US economist Nouriel Roubini.

Renowned US economist Nouriel Roubini has predicted a severe recession in the United States as the government tries to curb soaring inflation.

Roubini told Bloomberg on Monday that a combination of soaring inflation coupled with stagnation would lead to an economic recession in the US and elsewhere.

According to the government’s June statistics, inflation surged to a new four-decade high in the United States, as prices continue to climb at the fastest pace across many sectors of the economy.

US inflation hits 40-year high in June

Inflation has surged to a new four-decade high in the United States last month.

In this regard, Roubini, who is a New York University professor and chief executive of Roubini Macro Associates, issued a warning citing various reasons for an imminent recession.“I think there are many reasons why we are going to have a severe recession and a severe debt and financial crisis.”

The US economy is in a period of stagflation (low growth and high inflation), while debt ratios are “historically high,” Roubini pointed out.

“The idea that this is going to be short and shallow is totally delusional,” said Roubini , who has been nicknamed “Doctor Doom” by Wall Street for predicting the financial crisis of 2008-09.

In the meantime, US President Joe Biden and White House officials have been continuously making efforts to downplay the recession and blame the Federal Reserve for the unprecedented inflation.

"We're not going to be in a recession, in my view," Biden told reporters on Monday. "The employment rate is still one of the lowest we've had in history. It's in the 3.6 (percent) area. We still find ourselves, the people, investing."

US weekly jobless claims hit fresh 8-month high

The number of Americans filing new claims for unemployment benefits rose for a third straight week last week to the highest in eight months, suggesting some cooling in the labor market amid tighter monetary policy and financial conditions.

"My hope is we go from this rapid growth to a steady growth. And so, we'll see some coming down. But I don't think we're going to -- God willing -- I don't think we're going to see a recession," he continued.

US Treasury Secretary Janet Yellen earlier this month rejected claims that the American economy was in recession, saying the nation was instead going through a “necessary and appropriate” slowdown.

News regarding the US recession comes as a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates. The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

The highest-profile report will likely come out on Thursday, when the Commerce Department releases its first estimate of the economy’s output in the April-June quarter. Some economists forecast it may show a contraction for the second quarter in a row.

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