Our models are suggesting that 2024 is the more likely recession timetable.” “From a timing standpoint, we do not have a recession call on the table for this year. Therefore, we think it introduces greater stagflationary risk,” said Phil Orlando, chief equity market strategist for Federated Hermes, referring to the term for stagnant growth coupled with high inflation. “The consumer at the margin is not going to be able or willing to continue to pay those prices.
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However, central bankers likely won’t commit that far out, hoping that the work it does over the summer will be enough to reduce the pace of price increases and the necessity for more draconian policy tightening. is just “a couple of bad data points away from ‘recession.'”įed officials have expressed confidence they can keep raising rates without tipping over the increasingly fragile economy.įollowing the inflation report, markets priced in at least three consecutive half-percentage-point rate hikes - in June, July and September - and a pretty good chance of one more in November. Noting the Atlanta Fed GDP estimate, he said the U.S. “We’re in technical recession but just don’t realize it,” Bank of America chief investment strategist Michael Hartnett wrote before the inflation and sentiment reports hit. However, there’s a feeling elsewhere that the damage has already been done. And Thursday’s weekly jobless claims report for last week showed the highest level since mid-January. Coming after Q1’s decline of 1.5%, a further deterioration in the current period would trigger a common rule-of-thumb for a recession - two consecutive quarters of contraction.Ī strong labor market has been the principal firewall against a downturn, but even that has shown some chinks lately: Last week’s May nonfarm payrolls tally, though better than expected, represented the smallest gain since April 2021. The Atlanta Fed is tracking second-quarter GDP growth of just 0.9%. That came as household debt rose 8.3%, the biggest annualized gain since 2006. Household net worth in the first quarter fell slightly, the first decline in two years, according to Federal Reserve data released earlier this week. While consumer spending remains resilient, it’s come at the expense of a savings rate that has dipped to its lowest level since September 2008, the month Lehman Brothers crashed to set off the worst of the financial crisis. But the recent data suggest the moment of reckoning may be closer than many economists are willing to concede. How long it will take to get to that official recession is a matter of debate that only time will resolve.
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Only in retrospect will we know for sure, but it should not surprise us at this point.” “You can say that we’re in the midst of it right now, in the beginning phase. “I wouldn’t be surprised if it started in the third quarter of this year,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. could skirt its first recession since the brief pandemic downturn of 2020.
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Taken together, the data add up to an outlook that is not good for those hoping the U.S. That’s lower than the depths of the Covid outbreak, lower than the financial crisis, lower even than the last inflation peak back in 1981. That widely followed gauge of optimism registered a paltry 50.2, the lowest in survey data going back to 1978. got stronger Friday, as blistering inflation and historic lows in consumer sentiment painted an increasingly dark economic picture.Īs if the consumer price index increase of 8.6% wasn’t bad enough news, that release was followed later in the morning by the University of Michigan Index of Consumer Sentiment. The case that a recession is looming over the U.S.