US Treasury Secretary Janet Yellen has stated that, despite weaker growth in China, the US economy is not anticipated to enter a recession and is on a “good path” to reduce inflation.
Yellen stated in an interview with Bloomberg from India on Monday, during a meeting of Group of 20 financial officials, that the US is making good progress in lowering inflation.
She said despite fears that slower growth in China could spill over to other economies, the US economy is on “a good path” to rein in inflation.
“For the United States, growth has slowed, but our labour market continues to be quite strong. I don’t expect a recession,” Yellen said. “The most recent inflation data were quite encouraging.”
She added that many countries do depend on strong Chinese growth to promote growth in their own economies, particularly countries in Asia — and slow growth in China can have “some negative spillovers for the United States”.
Data on Monday showed China’s economy grew 6.3% in the second quarter on a year-on-year basis, accelerating from 4.5% in the first three months of the year, but well below expectations of 7.3%, as demand weakened at home and abroad.
Last week’s report on consumer prices was “quite encouraging,” Yellen said. Wednesday’s release showed that prices, excluding food and energy, rose 0.2% in June from the previous month, for the smallest advance since August 2021. Headline inflation ran at a 3% annual pace, well down from last year’s peak above 9%.
“The labour market’s been so strong, it has encouraged more prime-age people to enter” the workforce, taking some of the heat out of the market, she said. “Wage growth is moderating and inflation is subsiding.”
As for China, Yellen highlighted “relatively weak” consumer spending in the relatively slow economic rebound following the country’s post-COVID reopening. Monday’s figures showed that gross domestic product rose less than 1% from the first quarter, while retail sales for June rose less than forecast.
“It looks like consumers are more focused on building back their savings buffers,” Yellen said.