Escalating geopolitical tensions, a hardening of country borders, climate change and aging demographics have combined to make the economy more susceptible to supply shocks and prone to bouts of inflation, the report said.
The growth of the US economy, which is more susceptible to supply shocks and prone to bouts of inflation, is projected to slow to a 0.9 per cent pace this year, less than half that of 2022, KPMG said.
After a solid start, it is expected to suffer a mild contraction mid-year.
Unemployment rate may modestly rise.
Consumer spending may stall, but not collapse.
Consumer spending is expected to stall but not collapse. Tighter credit market conditions are eroding affordability and will take a toll on employment, especially among younger, smaller businesses that are more susceptible to the current tightening of credit market conditions, it said.
Prices in the service sector, where labour costs play a larger role in setting prices, are starting to look sticky. The Federal Reserve will continue to raise rates and keep monetary policy restrictive well into 2024, the report noted.
Firms that benefitted most from the pandemic-induced boom are pulling back; tech, finance and manufacturing activity are hardest hit. Start-ups and firms that were late to the recovery are still ramping up.
The challenge for the Federal Reserve is to balance the need to cool the economy with the need for financial stability, the KPMG report added.
Fibre2Fashion News Desk (DS)