How High Inflation Can Turn Into Stagflation
America's economic poisition is not strong at the moment. Inflation is around 8.5%, and the overall economy shrank at a 1.4% annualized rate in the first quarter. It takes two quarters of a declining economy to officially declare a recession, but the warning signs are ominous.
In addition, regardless of whether or not the economy ends up in an official recession, the combination of high inflation and low economic growth has a somewhat scary name: stagflation. Stagflation often brings with it all sorts of pain as companies strive to cut costs while consumers face ever rising prices. Unfortunately, high inflation can often turn into stagflation, and the beginning of that trend may already be underway.
For instance, there are early signs that companies are looking to reduce their staffing costs. Recent layoffs at Robinhood Markets, hiring freezes at Meta Platforms, and engineering cutbacks at Ford Motor Company may just be the tip of the iceberg of the challenges headed our way.
Source Fool.com
