A US recession is still possible, economists say. Not quite sure when.
“I think a gradual slowdown will still lead to a recession,” said Ben Ayer, the nation’s top economist. “It is very difficult to distinguish this time.”
Ayers is far from alone. Many Wall Street economists think the downturn is more likely than not. They refer to:
- More interest rate increases by the Federal Reserve.
- Slowing down business investment.
- A distressed housing market.
- Decline in the manufacturing sector.
- Continued problems in the banking system that may inhibit lending.
“I think a recession is underway,” said Steve Blitz, chief economist at TS Lombard. All the forces now in play create failure.
When is this just a small business?
Recent economist surveys suggest that the recession may now be a year or more away. Few expect a time as soon as before.
The economy is forecast to grow by around 1.5 to 2 percent in the recently concluded second quarter. And early forecasts for the third quarter — from July to September — indicated that gross domestic product expanded at a similar pace.
Based on the most recent Wall Street forecasts, the first recession could begin in the last three months of 2023.
That’s what economists at the Conference Board predict. The board’s leading economic indicators fell for the 15th straight month in June, a rare loss in the past that has always loomed ahead of a recession.
The last time the index experienced such a long decline was during the Great Recession of 2007-2009.
Many other economists, however, think a recession before the end of the year is much less likely.
Unemployment is extremely low at 3.6%, and many companies are still hiring. Consumers are continuing to grow at healthy levels, particularly in entertainment, travel and leisure, as well as the broader service side of the economy.
While higher borrowing costs have taken a bite out of the economy, hedgers say, households and businesses are still in good financial shape. That means they can continue to spend at levels that help the economy slow down.
Will Coppernoll, macro strategist at FHN Financial, said: “While the starting point is strong balance sheets for households and businesses, tighter credit conditions do not quickly signal a recession.
So when is a recession? Sometime in the middle of next year seems to be the best guess.
“It’s the first quarter we’ve seen a recession in the near future. [of 2024]Ayers said. “The cold is coming down more slowly than we thought.”
Even then, few economists predicted a recession as deep as 2007-2009. Blitz and Ayers see only a short and shallow decline, or period of weak growth. The so-called soft landing – inflation and stable growth – falling – is also increasing.
Assuming inflation continues to moderate, that is toward the Fed’s 2% target. If it’s big.
Inflation, using the central bank’s preferred core PCE price gauge, has stood at 4.5% to 5% this year.
Sustained high inflation will ensure higher rates than the Fed plans, economists say. And it all but guarantees a deep and long recession.
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