The CEO of a luxury furniture retailer has claimed it is ‘crazy’ to think the US economy is not in recession, as household wealth fell by a record $6.1 trillion in the second quarter.
‘I don’t know, people keep saying, are we going to be in a recession? We’re in a recession,’ said Gary Friedman, the chief executive of RH, formerly known as Restoration Hardware, in an investor call on Thursday.
‘Anybody who thinks we’re not in a recession is crazy. The housing market is in a recession, and it’s just getting started. So it’s probably going to be a difficult 12 to 18 months in our industry,’ he said.
The US economy contracted for two straight quarters in the first half of 2022, which is one informal sign of a recession, but President Joe Biden continues to insist that the economy is strong.
He and his administration have also sought to deflect claims the US is experiencing an economic contraction. That has sparked another culture war battle as the president’s cheerleaders – including some media outlets – have sought to defend his insistence that all is well with the US economy, despite crippling 8.5 per cent inflation.
‘I don’t know, people keep saying, are we going to be in a recession? We’re in a recession,’ said RH CEO Gary Friedman in an investor call on Thursday
The US economy contracted for two straight quarters in the first half of 2022, which is one informal sign of a recession
The issue has become hotly politicized, with Biden pointing to the robust job market as a sign of strength, and his critics citing soaring inflation and weak growth as signals that a recession is already underway.
Despite his grim warning, Friedman maintained an upbeat note on Thursday’s earnings call, and the company’s stock rose 4.4 percent in Friday’s session.
‘Like, we’ve been through storms before. We’ve been through recessions before. We’ve been through the Great Recession before,’ said Friedman. ‘We know what to do. We know how to play this game.’
RH, like other furniture retailers, has been hard-hit by inflation, which has sharply curtailed discretionary spending as consumers devote more of their household budgets to essentials such as food and gas.
Friedman said that a recession of some magnitude was predictable due to the Federal Reserve’s aggressive path of interest rate hikes.
In its fight against inflation, the Federal Reserve has raised its policy rate four times in a row, to 2.5 percent from near zero in March, and is expected to implement another jumbo hike later this month.
The central bank is attempting to cool inflation without crashing the economy, a path that seems to grow more narrow with each new piece of bad economic news.
President Joe Biden continues to insist that the economy is strong, citing the robust job market
On Friday, the Fed delivered one such negative signal in a report showing that household wealth plunged a record amount last month as the bear market wiped out trillions in savings.
Total household wealth in the US, defined as assets minus debts, tumbled to $143.8 trillion at the end of June from $149.9 trillion at the end of March, its second consecutive quarterly decline.
The $6.1 trillion quarterly decline was the largest on record, the Fed’s quarterly snapshot of the national balance sheet showed.
In the second quarter to its lowest in a year as a bear market in stocks far outweighed further gains in real estate values, a Federal Reserve report showed on Friday.
Through June, Americans’ collective wealth had fallen by more than $6.2 trillion from a record $150 trillion at the end of 2021.
The net drop in wealth in the second quarter was about $30 billion larger than the previous record decline notched two years earlier, as the onset of the COVID-19 pandemic upended financial markets.
Total household wealth in the US, defined as assets minus debts, plunged $6.1 trillion in the second quarter, the largest drop on record, due mostly to declines in the stock market
However, that decline – in the second quarter of 2020 – still stands as the largest on a percentage basis at 5.2 percent versus 4.1 percent in the most recent report.
The latest fall was led by a $7.7 trillion decline in stock market values as equities slid into a bear market in the first half of the year.
Markets dropped sharply in the first half of the year due to worries about surging inflation and the Fed’s aggressive response with interest rate increases.
The stock market losses outstripped a $1.4 trillion gain in real estate values.
Household debt growth slowed to a 7.4 percent annual rate from 8.3 percent in the first three months of the year, while business, federal, state and local government debt levels all rose.
Federal government debt increased 5.6 percent at an annual rate in the second quarter of 2022, down from a 10.2 percent annual rate in the previous quarter.
Published by Associated Newspapers Ltd
Part of the Daily Mail, The Mail on Sunday & Metro Media Group