Economists surveyed by The Wall Street Journal put the chances of a recession
occuring in the next 12 months at a 28% probability, up from 18% in January and 13% a year ago. Put in perspective, in September 2019, economists put the chances of a recession at 34.8%, on fears of a trade war growing between the U.S. and China and Fed rate increases in 2018 not spurring growth.
Economists' three biggest concerns are: inflation, now at 7.9% and projected to rise as high as 8.4% with tomorrow's CPI reading, supply chain shocks and inflation-adjusted GDP of just 2.6% for the fourth quarter of 2022, down a full percentage point from the forecast of a year ago.
On the plus side, GDP of 2.6% is still higher than the average 2.2% GDP in the decade before the pandemic, and economists foresee inflation falling back down to 7.5% in June and 5.5% in December. By late 2023, economists predict inflation will be just 2.9% — close to the Federal Reserve's 2% target.
Sixty-three percent of economists are still holding out hope for a soft landing, i.e. no recession, from the Fed's rate hikes, given the strong U.S. job market, rising incomes and low consumer debt.
The wild card continues to be consumers' excess demand, as Robert Fry of Robert Fry Economics puts it: "The problem is really excess demand, resulting from last year's fiscal and monetary policies. The longer the Fed waits to get inflation under control, the deeper the recession will be."
The Wall Street Journal surveyed 65 business, academic and financial forecasters April 1-5.
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