Only a quarter of business economists and analysts expect the U.S. to fall into recession this year.
WASHINGTON — Only a quarter of business economists and analysts expect the U.S. to enter a recession this year. And any economic downturn is likely to be caused by external shocks, such as the conflict involving China, rather than by domestic economic factors such as rising interest rates.
However, respondents to a National Association for Business Economics survey released Monday still expect year-over-year inflation to exceed 2.5% through 2024, exceeding the Federal Reserve's 2% goal. ing.
A year ago, most forecasters expected the U.S. economy, the world's largest, to slip into recession as the Federal Reserve raised interest rates to combat an inflation explosion that began in 2021. The Fed raised the benchmark interest rate 11 times between March 2022 and July 2022, which will reach the highest level in more than 20 years in 2023.
The inflation rate fell from a peak of 9.1% in June 2022 to 3.4% in December. But the economy continued to grow unexpectedly, and employers continued to hire and resist layoffs despite rising borrowing costs.
The combination of subdued inflation and resilient growth has raised expectations, as reflected in the NABE survey, that the Fed will be able to achieve a so-called soft landing, or beat inflation without the pain of a recession. There is.
“The panelists are more optimistic about the outlook for the domestic economy,” said Sam Carter, chief economist at mortgage giant Freddie Mac and chair of the association's Economic Policy Research Committee.
The Federal Reserve has halted rate hikes and signaled it expects to cut rates three times this year.
However, a growing number of economic forecasters are concerned that the Fed is keeping interest rates unnecessarily high, with 21% in a NABE survey calling the Fed's policy “too restrictive,” and in August This was up from 14% who said so. Still, 70% say the Fed's judgment is “mostly correct.”
Respondents are concerned about the possibility of conflict, if not outright war, between China and Taiwan. 63% believe such an outcome is at least “moderately likely.” Similarly, 97% believe there is at least a moderate chance of conflict occurring. Oil prices in the Middle East will exceed $90 per barrel (currently about $77), disrupting global shipping.
Additionally, 85% are concerned about political instability in the United States around the November 5 presidential election.
Respondents are also increasingly concerned about the U.S. government's finances, with 57% saying budget policy (which creates a wide gap between what the government spends and what it collects in taxes) needs to be more disciplined. This is an increase from 54% in August.
They argue that the most important goals of government budget policy should be promoting growth in the medium to long term (cited by 45% of respondents) and reducing the federal deficit and debt (42%). . A distant third is his goal of reducing income inequality, cited by 7%.
