Last updated: June 24, 2023 at 10:41 am ET
First published: June 24, 2023 at 8:31 am ET
Fears of a US recession have risen sharply this week, in part because of how strong the economy currently looks.
Welcome to the opposite world of failure anxiety. This is the concern in a nutshell. With the labor market strong and “human-like” consumer spending growth still unlikely for the Federal Reserve to raise interest rates, some economists think the Fed will need to raise rates much higher — and ultimately create a much tougher accommodation environment. economy…
Fears of a US recession have risen sharply this week, in part because of how strong the economy currently looks.
Welcome to the opposite world of failure anxiety. This is the concern in a nutshell. With the labor market strong and “human-like” consumer spending growth still unlikely for the Federal Reserve to raise interest rates, some economists think the Fed will need to raise rates much higher — and ultimately create a much tougher accommodation environment. Economy.
However, there are many views on the likelihood of a recession.
Steve Blitz, chief U.S. economist at TD Lombard, says some economists are less concerned about a recession. In a note to clients, Blitz said the stock market was “daydreaming” while ignoring the fact that “the downside outlook remains very much intact.”
The topic doesn’t seem to be front and center for lawmakers this week. The word “recession” was used only once in Fed Chairman Jerome Powell’s testimony to the Senate Banking Committee on Thursday, referring to the 2008 financial crisis.
In an interview with Bloomberg News, Treasury Secretary Janet Yellen said on Friday that the likelihood of a recession has “reduced” but is still a risk because the Fed is tightening policy.
Still, economic indicators that are perfectly positioned to provide early warning of a recession remain weak. The leading economic index fell 0.7% in May, the fourteenth straight monthly decline, and points to a recession later this year or the first six months of 2024.
Comment on this week’s recession
- “Risk markets are grappling with inverted yields as global recessionary concerns return to mainstream, which could cause some economic pain in core inflation,” said Stephen Innes, managing partner of SPI Asset Management, in a note to clients.
- “We’re definitely seeing a lot of signs of softening. But I’m not sitting here worrying about it because the consumer going into this slowdown is in very good health. The corporate client is in very good health, in terms of their balance sheets. There are a handful of banks that are not properly managed, but for the most part , banks are in very strong health. So the typical multipliers of a recession are not in place,” Citigroup CEO Jane Foster said in an interview at a Fortune magazine event.
- “Easing financial conditions, improving consumer sentiment and stability in housing have slightly eased the risks of an imminent recession. However, our tracking models suggest that economic volatility is likely to peak later this year,” Andrew Hunter, deputy chief economist at Capital Economics, said in a note to clients. He said in a note.
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