The US might avoid a recession, but it won't be unscathed if the European economy tanks

Some experts think the US is in a recession. Some believe it's going there. Others think that the US will not have one. Even if the country avoids a second recession in three years, a struggling European economy could affect US growth in the future.

With several big banks reporting earnings over the past week, investors and economists have been looking over the comments of banking executives for signs of a recession. The commentary struck an optimistic tone despite inflation-adjusted earnings declining at their fastest rate in 40 years and consumer sentiment near all-time lows.

While sentiment has shifted, little of the data I see tells me the US is on the verge of a recession.

The US isn't out of the woods just yet, despite the current data suggesting it is. Even if the Federal Reserve plays its part well, a weak European economy could make it harder for the central bank to achieve its desired soft landing.

"We expect a very difficult winter is coming, and that's due to disruptions in the energy supply," Fraser said, "and that's because of the belief that the war in Ukraine will not end anytime soon."

The war in Ukraine and the related energy crisis are said to have weakened the European economy. The European Union's inflation rate rose 8.6% in June.

The US will not be able to get away without a problem if the European economy does not improve. Roughly 15% of all US exports went to the European Union in 2011. Fewer exports and sales for American businesses could be a result of a weak European economy.

Mineral fuels and machinery were the top US exports to Europe in 2020. Texas, California, and South Carolina shipped more goods to Europe than any other state.

Europe is fighting the hardest right now because of the war in the Ukraine because of the pressure on gas and gas prices.

The banks are not the only ones who are concerned about the European economy. The risk of a recession in Europe is real, according to a report by Oxford Economics. The odds of a recession in Europe increased in the first week of July, according to a survey of analysts.

The path of interest rates is going to be discussed by the European Central Bank. With the economy inching towards a recession, one would expect the central bank to lower interest rates. Europe's high inflation is a concern and the bank may decide higher interest rates are needed to stifle it.

The euro has fallen to a 20-year low relative to the US dollar as a result of a rate hike. The weakened euro has made US imports more expensive for European consumers and businesses, which could hurt American businesses.