Michigan braces for dip in economy and hiring, hopes to avoid recession

“While consumers still seem relatively optimistic about the stability of their incomes, their perceptions of the economy are much more heavily influenced by concerns about inflation,” said University of Michigan economist Joanne Hsu. in a statement accompanying the June release of consumer sentiment data. .

“As higher prices become harder to avoid, consumers may feel like they have no choice but to adjust their spending habits, whether by replacing goods or giving up entirely. to purchases,” Hsu said. “The speed and intensity at which these adjustments occur will be critical to the trajectory of the economy.

The slowdown is partly calculated, said Brian Calley, CEO of the Small Business Association of Michigan, because the Federal Reserve is using monetary policy to stem inflation, which in May was at an annualized rate of 8.6%.

The Fed has raised its benchmark interest rate three times this year and is signaling that it will do so again. As a result, business and consumer loans are becoming more and more expensive. The rate on a new 30-year mortgage, for example, was around 5.5% at the end of June, down from around 3.5% at the start of the year. The difference is $118 more per month for every $100,000 borrowed.

“Rising interest rates are meant to slow business,” Calley said. “And I think it’s fair to say it’s a tough transition, and it can be painful as you go through it. But I would generally say it does what it’s supposed to do, that’s i.e. slow down overall economic growth.

Across the country, household disposable income declined in the first half of the year, according to data released this week, and credit debt is starting to rise.

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