The chance of a recession in USA next year is now close to a draw as the inflation persistent and heated should encourage the Federal Reserve to seek more aggressive increases in feesaccording to economists.
The probability of a contraction in the next 12 months is 47.5%, well above the 30% recorded in June, according to the latest monthly survey by Bloomberg with economists. In March, the odds were only 20%.
The latest survey was conducted from July 8 to 14, with 34 economists.
The Fed “has made it clear that it is prepared to sacrifice growth while desperately trying to control inflation through higher interest rates,” said James Knightley, chief international economist at ING. “This is also contributing to the strongest dollar in 20 years, which will hurt international competitiveness.”
“In this environment, we see clear risks of reduced consumer spending, while falling corporate profitability means that companies begin to guard themselves,” Knightley said.
Economists cut second-quarter growth estimates to an annualized rate of 0.8%, down from 3% in last month’s survey. Growth is estimated to be less than 2% in the second half of the year.
For 2022, the GDP is expected to rise an average of 2.1%, less than the previous month’s 2.6% growth forecast. In 2023, GDP is expected to increase by an average of 1.3%.
Forecasts for the Fed’s key inflation metric — the personal consumption spending price index — have been raised for each quarter of this year.
While most of the estimates were submitted before the June inflation report was released on Wednesday, the indicator is now seen up 6.3% year-on-year in the current quarter. That’s 0.3 percentage point higher than last month’s estimate.
For the entire next year, the index is expected to stay above the Fed’s 2% target.
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Source: Moneytimes
I am an author at Global happenings and I mostly cover automobile news. In my time working in the automotive industry, I have developed a keen interest in the latest developments and trends. My writing skills have also allowed me to share my knowledge with others through articles and blog posts.
