Insurance giant Allianz has warned that the US economy is at risk of a "crash landing" due to tightening credit conditions and the ongoing banking crisis. Allianz's analysts expect the economic momentum to deteriorate in the second half of the year, with negative confidence effects from the banking sector and the unresolved energy situation in Europe contributing to the downturn. While the US economy has picked up pace in early 2023, Allianz warns that this revival will be short-lived. Several major banks have failed recently, and the Federal Reserve and the Treasury have taken steps to prevent a systemic crisis.
Allianz's research and analysis division published the report, which projected a sizable recession in the US at the end of the year due to increasingly entrenched negative confidence effects. The report highlights that a slowdown in housing, manufacturing, and construction could occur as interest rate hikes increase borrowing costs and dampen investment. Other prominent figures, such as economist David Rosenberg, Robert Kiyosaki, and billionaire Barry Sternlicht, have also warned of a crash landing in the US economy.
The report also underscores the impact of the unresolved energy situation in Europe on the US economy. The energy crisis has created significant supply chain disruptions, leading to rising energy prices and inflation. The combination of these factors poses a significant risk to the US economy, which could lead to a hard landing in the coming months. The Allianz report serves as a warning to investors and policymakers, urging them to take action to mitigate the risks and stabilize the US economy before it's too late.
Overall, the Allianz report serves as a sobering reminder of the fragility of the US economy and the potential risks that lie ahead. As we enter the second half of the year, it will be critical to monitor the economic indicators closely and take swift action to prevent a crash landing.
