Leading banks and economists this month are forecasting the odds of recession over the next two years. Some say a mild recession could start at the end of this year, heading into the first quarter or the first half of 2023.
Deutsche Bank announced the possibility of a recession about two weeks ago followed by Goldman Sachs, which predicts a 35 percent chance of recession in 2 years and a 15 percent chance in 12 months, said Yahoo!finance.
Recession is defined as a contraction in the economy, rather than growth, for at least six months.
Moody’s Mark Zandi is predicting a one in three chance of a recession in the next 12 months, said CNN.
A Reuters poll said the probability of recession next year is 40 percent.
The Wall Street Journal said economists rank the chances of recession at 28 percent over the next 12 months, up from 18 percent a few months ago.
Former Treasury Secretary Larry Summers puts the chance at about two thirds, said the Boston Globe.
Economists tend to think a recession could hit in the fourth quarter going into early or mid next year, said the Globe.
The war in Ukraine has only fanned the flames of inflation in the US. This may lead the Federal Reserve to raise interest rates more aggressively to temper inflation. The last 8 out of 9 times that happened since 1960 resulted in recession, said investment bank Piper Sandler, according to the Boston Globe.
But Federal Reserve Chairman Jerome Powell countered that there were times in the past when the Fed was able to moderate inflation without causing recession, as in 1965, 1984 and 1994, reported CNN.
Powell said he doesn’t see an elevated chance of recession and that the US economy can withstand higher interest rates, said the Boston Globe.
The International Monetary Fund also sees continued growth in the US economy as do some analysts such as Bob Schwartz at Oxford Economics. Rather than recession, Schwartz forecasts the US economy will grow by 3.1 percent next year (down from 5.7 percent last year) followed by 2 percent growth in 2024. The International Monetary Fund says the US economy will grow by 3.7 percent this year and 2.3 percent in 2023.
However, many economists predict a “mild recession,” said CNN. Unemployment may peak above 5 percent, Deutsche Bank predicts. That’s much lower than the 14.7 percent unemployment seen in 2020 or the 10 percent unemployment seen in 2009, said CNN.
The Federal Reserve is expected to raise interest rates by half a point in May and then half a point in June
Sources: Reuters, Boston Globe, CNN, Yahoo!finance
demand destruction (gas or food or housing or car electronics)due to inflationary pressures ie 25 gallons of gas at $6 per leaves little money to buy into wants and not needs much less a $6 loaf of wonder bread.
just my 2
cents
Recessions loom then escalate into being when the media starts using the word recession.
One thing I have noticed over the years (35+) is the industry being so dependent on Government spending. Lots of spring and early summer spending on products we sell is driven on Tax Return refunds. The recent bump in sales overall in the last two years was totally driven by COVID relief money. With our new normal of Inflation and supply issues I suspect sales going forward will be decreasing not increasing.
In its 44 years, Soundcrafters has survived a couple (if not a few) recessions of the past. After the first, recognizing the second in its infant stages, I recall the words of wisdom and confidence that a great colleague of mine, Hugh Whiteman of Denver based quality car audio who said, and it rings in my mind…. “Someone indicated that there was a recession; we choose not to participate”
Looming?
Absent some serious global or regional disaster (covid for instance) the real cause for economic instability is un-certainty on the part of policies that impact the economy, i.e., “will I have a job tomorrow…?”. I perceive if we can get the policy makers and enforcers (government) to be a little more predictable the chances of recession might be mitigated to large degree. I suppose however the chances of such policy maker/enforcer predictability might not be too good…