U.S. Economy Approaches Tipping Point, Evidence Indicates Downturn in Europe
The U.S. economy is thriving, with a surge of 4.9 percent in the third quarter of 2023, according to IPC’s October 2023 Economic Outlook Report. The unemployment rate is 3.8 percent. Inflation is high, but it is decreasing, and wage growth is outpacing inflation, meaning workers are seeing an increase in purchasing power.
In Europe, economic growth remains delicately positive, but energy prices have become less predictable due to rising geopolitical tensions. The war in Ukraine and the Israel-Hamas conflict could further erode confidence and increase uncertainty among businesses and households.
According to Shawn DuBravac, IPC’s chief economist, “Many of the forces driving U.S. economic growth in the third quarter will likely reverse in the coming quarters. While growth is strong, maintaining the current momentum will be very difficult in the year ahead. In Europe, the coming months will provide a clearer picture of whether the current economic challenges persist or evolve in 2024.”
Additional data in the October IPC Economic Outlook show:
- In the U.S., a recession is not a foregone conclusion, but the probability remains high. Regardless, the U.S. is entering a period of slower growth.
- U.S. industrial production rose 0.3 percent in September. The manufacturing sector rose 0.4 percent during the month.
- In Europe, early results for Q3 appear mixed. Germany, Europe’s largest economy, declined 0.1 percent after rising 0.1 percent in the prior quarter.
- In Europe, motor vehicle manufacturing output rose 4.1 percent (month-on-month). The sector is up 11.2 percent over the last year.