With many economic forecasts agreeing that a recession seems almost certain in the coming months, the only area of disagreement centers on its size and duration.
According to a just-released report by the Frankfort, Germany-based Deutsche Bank, the odds of the U.S. slipping into a recession before the end of the year or in 2024 appear to be increasing.
Presenting what it calls a “monthly chartbook,” the Deutsch report remarks: “This model shows a twelve-month possibility of recession remaining above 90%.”
“Given that inflation peaked significantly above target,” notes the Deutsche report, “the Fed should err on the side of tightening too much, rather than too little.”
Continues the report, called US Economic Perspecetives: “A U.S. recession remains more likely than not.”
The document additionally notes that in order for a much-desired “soft landing” to actually become reality, the Fed would have to first “depress demand below potential.” By so doing, it would positively impact inflation.
The Deutsche report comes as the American Bankers Association has issued a new study contending that the country is more likely than not to avoid a major recession, even as economic growth has somewhat slowed down.
The ABA report, compiled by the association’s Economic Advisory Committee, sees real economic growth slowing from the 2.1% of earlier this year to around 1%, with matters slightly improving next year.
A press release issued by the ABA contends that “recession risks center primarily around the delayed impact of monetary tightening, deteriorating credit availability, and high credit costs.”
Additional risks may be found in a “prolonged government shutdown or renewed flaring of geopolitical tensions.”
The ABA committee report also notes that business investment appears likely to slow in the coming months, “particularly in areas of the economy benefitting from government policy initiatives such as chips and electric vehicle manufacturing.”
Businesses, meanwhile, appear to be preparing for an economic slowdown by “reducing inventory accumulation and hiring.”
Add to the forecasting mix the predictions of two economists from the New York-based Conference Board who suggest that a decline in consumer spending may be the key to any recession forecast.
“The all-important U.S. consumers have stood their ground and continued to spend, and most data underlines spending growth,” say economists Dana Peterson and Erik Lundh, in a signed editorial for the CNN’s website.
“But some emerging information suggests that consumers may eventually stumble,” continue the economists, “which could drive the U.S. into a brief recession.”
By Garry Boulard
