Recent economic data suggests that the US economy is slowing down, which could potentially affect the stock market. The ISM survey showed that manufacturing activity declined in March to its lowest level since May 2020, and all components of the manufacturing index declined below 50 for the first time since 2009, indicating a contraction in manufacturing activity. The ADP jobs report also showed signs of a weakening labor market, with only 145,000 jobs added in March, missing expectations by 65,000 and well below February's reading of 261,000. Job openings fell below 10 million in February for the first time since May 2021, and weekly jobless claims hit 228,000 last week, ahead of the 200,000 analysts expected. The Federal Reserve Bank of Atlanta has lowered its GDP forecast considerably over the past two weeks, with its GDPNow forecast expecting the US economy to grow just 1.5% in the first quarter. Retail sales growth also fell 0.4% in February, and Costco reported a 0.9% decline in retail sales growth at its stores in March, the first monthly sales decline in almost three years. Despite the signs of economic slowdown, some Fed Presidents remain focused on taming inflation and have reiterated their views on interest rate hikes. However, with inflation showing more signs of easing, the Fed's tightening policies could eventually break something bigger than Silicon Valley Bank, which would spell trouble for both the economy and the stock market. The stock market is now in "watch" mode as it consolidates sideways and gauges whether the Fed will pause its interest rate hikes and whether corporate earnings results will prove as resilient as they have over the past year.
US economy expected to slow down soon