JPMorgan CEO Dimon sums up the US economy in one paragraph – and it sounds wrong

Jamie Dimon, CEO of JPMorgan Chase & Co.

Christopher Morin | Bloomberg | Getty Images

JPMorgan Chase CEO Jamie Dimon summed up the state of the US economy in one paragraph on Thursday, and all is not good.

On the one hand, Dimon said that “the U.S. economy continues to grow and the labor market and consumer spending, as well as their ability to spend, remain healthy.”

He went on to throw out a number of warning signs saying: “But geopolitical tensions, high inflation, declining consumer confidence, uncertainty over rising rates and unprecedented quantitative tightening and their effects on global liquidity, combined with the war in Ukraine and its adverse effects on global energy and food prices will most likely have negative consequences for the global economy at some point.”

Dimon’s comments, which were made in JPMorgan Chase’s latest quarterly publication, come as investors and economists try to determine whether the economy is headed for a recession – and the recent flurry of economic data doesn’t provide much. of clarity.

Good

At this time, there are no signs that the US economy is entering a recession, according to comments from JPMorgan executives during their earnings call.

As Dimon said, the job market seems to be on solid ground. Last month, the US economy added 372,000 jobs, beating a Dow Jones estimate of 250,000. Meanwhile, the average hourly wage rose last month at a 5.1% year-on-year pace. the other.

Consumer spending also appears to be picking up, albeit at a moderate pace. Spending in May rose 0.2%, below a Reuters estimate for a 0.4% gain.

Even within JPMorgan’s own business, there were signs of consumer strength. Consumers are still spending in discretionary areas like travel and restaurants. In its consumer and community banking division, combined debit and credit card spending rose 15% in the second quarter. Card loans increased by 16%, with the continuation of a good number of new account creations.

However, the good news may end there.

The bad

The consumer price index – a widely followed measure of inflation – rose last month by 9.1% from the year-ago period. This beat the Dow Jones forecast of 8.8% and represents the fastest pace of inflation since 1981.

One of the main drivers of this increase is soaring energy prices. West Texas Intermediate, the US oil benchmark, is up more than 28% in 2022 as the war between Ukraine and Russia raises concerns about already tight supply in the market.

Rising prices have also shaken US consumer confidence. The University of Michigan consumer confidence index hit a record low last month, falling to 50.

These inflationary pressures have prompted the Federal Reserve to tighten monetary policy this year faster than investors expected. Last month, the central bank raised rates by 0.75 percentage points, and some Wall Street economists expect the Fed to hike one point later in July.

Inflation also had massive political ramifications in the United States.

According to a poll by the Pew Research Center, President Joe Biden’s approval rating has dropped to 37% – with a majority of Americans saying his policies have made the economy worse. Pew also found that only 13% of Americans rate US economic conditions as “excellent/good.”

Dimon’s remarks follow comments he made last month in which he warned investors to prepare for an economic “hurricane.”

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