High inflation and recession fears are putting more strain on some industries than others.
Shoppers are feeling the pinch as inflation raises the cost of gas, groceries, and a variety of other goods and services.
Airlines, movie theatres, and specialty retailers are among the companies that claim to be immune to the slowing economy.
However, other companies, such as McDonald's, are seeing signs that consumer demand is dwindling.
Inflation and recession
Referring to the latest Fed’s decision, the funds rate is expected to increase to 3.40% by end of this year.
This is higher than initial expectation of 1.90% forecasted in Mar-22, says MIDF.
"We believe the Fed is tightening the interest rate rather than normalisation. In 2019, the funds rate was at 2.50%. The rush in tightening monetary policy was due to uptick in inflation trends," it says.
Both headline and core inflation surged in post-pandemic among others due to domestic economy reopening, supply-chain disruptions globally and elevated commodity prices.
Jobless rate in the US declined to 2-year low at 3.6% in May-22 and business confidence as reflected in the S&P PMI readings indicate strong optimism among business community.
"However, we have seen moderating signals in the economy as inflation starts to bite consumption and the tightening interest rate is putting extra pressure.
"For instance, MoM retail sales growth has been on decelerating trend since Jan-22 and recorded its first contraction in May-22 at -0.3%," the analyst firm says.
Surveys on consumers showed increasing pessimism given that Michigan consumer sentiment fell sharply to a record low of 50.2 in Jun-22 and IBD/TIPP Economic Optimism Index declined to 38.1, lowest in more than a decade.
"In line with the Fed’s projections, GDP growth in the US is predicted to grow slower than initial forecast, +1.7% vs. +2.8%.
"Even with these moderating signals, we believe the Fed to remain steadfast with its tightening plan, at least returning the funds rate to 2019’s level. In particular, most referred inflation indicator, the core PCE inflation still above the Fed’s target rate of +2.0%," it says.