Our highly experienced Kiplinger Letter team assesses the state of the U.S. economy and the events affecting it, producing regular forecasts on the outlook for the economy, to help you make better financial decisions.
Our experienced Kiplinger Letter team will update you on all the important developments (Get a free issue of The Kiplinger Letter or subscribe). You will always get updates first by subscribing, but we will publish many (but not all) of the forecasts a few days afterward online. Here’s the latest…
If spending cuts are required to resolve the looming debt limit crisis, they will likely be moderate and/or spread out over time, so as not to ding current GDP growth too much. However, any cuts that take place at a time when the economy is slowing will likely make that slowdown a little worse.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
There is precedent for this sort of outcome. The 2011 debt limit fight between President Barack Obama and House Republicans resulted in $917 billion in cuts spread over 10 years, which reduced the immediate impact on the economy.
Lack of resolution to the debt crisis
But note that the White House is determined to avoid compromise, hoping instead that fissures in the GOP eventually drive moderates to its side. With no resolution, Uncle Sam can spend only the revenue coming in from taxes and other sources, triggering even more painful automatic spending cuts.
The timing of a potential crisis depends on June 15 quarterly tax payments. These could delay the moment of truth until late July or early August if they’re good. Otherwise, the debt limit would be hit in June, per recent Treasury Department warnings.
Troubles with manufacturing
Manufacturing’s April expansion doesn’t mean the sector is out of the woods, despite a benchmark survey showing improvement in orders, production, hiring and exports.
Other parts of the survey indicate a future slowdown: Businesses think customer inventories are too high, which happens only when a downturn is coming. Manufacturer inventories and order backlogs are also contracting.
Still, it’s likely that any slowdown will be gradual, a source of frustration for the Federal Reserve, which had hoped for faster relief of price pressures.
Manufacturers face a dilemma with their suppliers. Facing parts shortages in 2021 and 2022, many had expanded the number of suppliers they worked with to hedge against supply chain risk. With demand waning, they’ll face a tough choice between the hard-won diversification of their supplier bases and preserving cash.
This forecast first appeared in The Kiplinger Letter. Since 1923, the Letter has helped millions of business executives and investors profit by providing reliable forecasts on business and the economy, as well as what to expect from Washington. Get a free issue of The Kiplinger Letter or subscribe.
Read more
-
How to Navigate Your Medicare Advantage Plan in a DisasterIf you're a Medicare Advantage member in an area that has been impacted by a disaster, you might be worried about access to care and medicine. Here's what you need to know.
-
Older Investors: Boost Your Savings and Retire EarlierThis one measure can help older investors retire up to two years earlier and potentially double their retirement savings.
-
How to Adopt AI and Keep Employees HappyThe Kiplinger Letter As business adoption of AI picks up, employee morale could take a hit. But there are ways to avoid an AI backlash.
-
The Rise of AI: A Kiplinger Special ReportThe Kiplinger Letter Our special report looks at the opportunities and challenges of generative AI and how its rapid move into the mainstream is impacting every aspect of our lives.
-
Big Changes Are Ahead for Higher EdThe Kiplinger Letter A major reform of higher ed is underway. Colleges are bracing for abrupt change, financial headwinds and uncertainty.
-
AI-Powered Smart Glasses Set to Make a Bigger SplashThe Kiplinger Letter Meta leads the way with its sleek, fashionable smart glasses, but Apple reportedly plans to join the fray by late 2026. Improved AI will lure more customers.
-
Breaking China's Stranglehold on Rare Earth ElementsThe Letter China is using its near-monopoly on critical minerals to win trade concessions. Can the U.S. find alternate supplies?
-
Things that Surprise Business Owners When It’s Time to SellThe Kiplinger Letter When it’s time to retire and enjoy the fruits of growing their business, owners are often surprised by how tough it is to give up their baby!
-
What New Tariffs Mean for Car ShoppersThe Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
AI’s Rapid Rise Sparks New Cyber ThreatsThe Kiplinger Letter Cybersecurity professionals are racing to ward off AI threats while also using AI tools to shore up defenses.
