In light of the Fed’s failure to halt inflation so far, and its intention to be more aggressive in raising interest rates to fight inflation, most macroeconomists in the United States now believe the country’s economy is heading for a recession next year.
The Financial Times and Global Market, a research institute at the University of Chicago, conducted a survey in early June among economists specializing in macroeconomics across the United States regarding the chances of a recession.
A recession is officially defined as the US CBS identifies a significant decline in economic activity for at least two quarters. A slowdown was recorded in the first quarter of the year when US GDP fell by 1.5%. The data for the second quarter will be published in September.
According to the survey, almost 70% of economists thought that at some point in 2023 the data would indeed show a recession. 38% believe that the recession will start in the first two quarters of the year, and another 30% believe that it will happen in the second half of the year. At the same time, only one economist believes that a recession will register this year and another 30% believe that the recession will not come before 2024.
In relation to inflation – more than half of the economists surveyed believe that geopolitical tensions and energy prices will continue until the end of 2022 and into 2023, and will most likely cause further pressure on prices. Additional factors included the problems in supply chains that will continue to affect price increases.
Economists have also addressed factors that could make the recession easier. About a quarter of them believe that consumer spending will be the most important factor in limiting losses and improving the chances of a moderate economic slowdown. The most important factor that can mitigate the slowdown they say is the hot US housing market, with more than half of economists believing the housing market will be what will keep the US economy from slipping into a severe recession.
Morgan Bank CEO Stanley James Gorman also commented on the issue, and he believes there is a 50% chance of entering a recession, compared to 30% in his previous forecast. At the same time he also agrees that the recession will not be particularly severe. “I do not think we fall Into some massive hole in the coming years. I think the Fed will eventually stop inflation. You know it’s going to be bouncy. “People will lose a lot in the retirement savings plans (401K) this year.”
Gorman criticized the central bank’s decision-makers. He thinks they waited too long for them to start raising interest rates and were left with less flexibility now. He said the bank began discussing the possibility of a recession as early as August last year when it was clear that inflation was going to be more sustained than the Fed had hoped.
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