Reuters Poll: US Heading Into Shallow Recession
Facts
- Economists polled by Reuters predict that the US economy is heading into a short and shallow recession in the coming year, unanimously expecting the US Federal Reserve to go for a smaller 50 basis point interest rate hike on Dec. 14.
- 84 economists were polled between Dec. 2-8. Of the 45 that provided GDP forecasts, 27 predicted a contraction for two straight quarters or more at some point in 2023. Out of 48 that were asked, 35 said any recession would be short and shallow, 8 said long and shallow, 1 predicted short and deep, and 4 said there wouldn't be one at all.
- The predictions came after Bank of America CEO Brian Moynihan claimed a "shallow" recession was likely to come in 2023. The news came alongside an NBC poll showing 68% of US voters believe they're already in a recession, with 58% saying America's best years are in the past.
- Nouriel Roubini, a New York University professor emeritus nicknamed "Dr. Doom" for his pessimistic predictions, has even warned that the S&P 500 could decrease by another 25% in the event of a severe downturn in 2023.
- JPMorgan CEO Jamie Dimon told CNBC that while consumers and companies are in good shape, the $1.5T US consumers have in excess savings from pandemic stimulus programs may run out by mid-2023. The Fed last month raised interest rates by 0.75 for the fourth consecutive time, taking them to 3.75-4%.
Sources: Reuters, FOX News, New York Post, and We Forum.
Narratives
- Narrative A, as provided by Washington Examiner. It's very rare that prominent economists agree on a policy matter as important as interest rates, yet with wage inflation simply being too high there are several signs that a recession is looming. The personal saving rate is too low and savings are being used to finance current consumption alongside slowing factory activity. A hard landing is clearly coming for America.
- Narrative B, as provided by Financial Times. Until now, the consensus economic view hasn't forecast a single US recession since records began in 1970. Within the market, it's not the inevitable that happens but rather the unexpected, and with the precedent of economists consistently being wrong surrounding recessions, maybe it's a sign that there won't be an economic crisis in 2023 after all.