US economy sags, reinforces recession risk 

The U.S. economy slowed sharply from January through March, decelerating to a 1.1% annual pace as higher interest rates hammered the housing market and businesses reduced inventories, the Associated Press reports. 

Thursday’s estimate from the Commerce Department showed that the nation’s gross domestic product weakened after growing 3.2% from July through September and 2.6% from October through November; however, consumer spending, which accounts for about 70% of U.S. economic activity grew at a 3.7% annual pace, the fastest quarterly pace in nearly two years.  

Many banks have tightened their lending standards since the failure last month of two major U.S. banks, making it even harder to borrow to buy a house or a car or to expand a business. 

There is widespread skepticism that the Fed will succeed in its aim for a soft landing, cooling growth enough to curb inflation but avoid recession. An economic model used by the Conference Board, a business research group, puts the probability of a U.S. recession over the next year at 99%. 

The global backdrop is also looking bleaker. The International Monetary Fund this month downgraded its forecast for worldwide economic growth, citing rising interest rates around the world, financial uncertainty, and chronic inflation. 

Still, the U.S. economy has surprised before. 2021 and 2022 were the two best years for job creation on record, and hiring has remained strong so far this year, though it has decelerated from January through March.