The Risk of Recession: Economists Weigh In
By Is the current economic climate a recession? Economists have differing opinions.[0] Almost half of Americans think we're already in a recession, but economists say a recession could be on the way. Certain pieces of information unambiguously suggest a recession while other pieces of information point to a “soft landing” scenario.[1] The Leading Index from Wells Fargo has declined 10 times in a row, which is consistent with recession.
However, the US economy showed remarkable resilience at the start of the year, with robust demand keeping inflation elevated and heaping pressure on the Federal Reserve to stomp the brakes even harder.[2] January's inflation rate being higher than expected caused some worries that the slowing of inflation, known as disinflation, had been put on hold.[3] This week's US consumer price and retail sales data revealed persistent inflation and strong demand, which could lead the Federal Reserve to raise interest rates higher than originally anticipated.[4]
Economic resilience could potentially lead to a stubborn inflation rate.[5] The Fed's belief that interest rates should increase more than what the markets had previously predicted has been accepted by the majority of investors.[5] After the January consumer-price index and producer-price index demonstrated reduced but steadier inflation, the Federal Reserve may raise its expectations.[5]
According to Dana Peterson, the chief economist at The Conference Board (an economic think tank), she has observed signs of recession in the data.[0] Justin Wolfers, an economist, says that while he sees good things, businesses are very forward-looking and if they get a whiff of weakness ahead, they will pull back.
In anticipation of further economic and market volatility, particularly during the initial six months of the year, the Federal Reserve is anticipated to continue raising interest rates.[6] Should inflation persist, it is possible that interest rates will remain steady and economic growth will begin to recover.[6] US data continue surprising to the upside, which could indicate a recession could be avoided for the time being.[4] Equity sentiment remains unaffected despite good news and expectations of higher rates.[4] The dollar was slightly supported by higher core yields, though no critical threshold levels were surpassed.[4]
0. “Is the economy headed for recession or a soft landing?” Houston Public Media, 17 Feb. 2023, https://www.houstonpublicmedia.org/npr/2023/02/17/1157456149/is-the-economy-headed-for-recession-or-a-soft-landing
1. “Recession Signal As Consumers Struggle To Pay Bills” Real Investment Advice, 17 Feb. 2023, https://realinvestmentadvice.com/recession-signal-as-consumers-struggle-to-pay-bills
2. “US Economy Keeps Charging Ahead, Adding Pressure on Fed to Hike” Yahoo! Voices, 15 Feb. 2023, https://www.yahoo.com/now/us-economy-keeps-charging-ahead-171126908.html
3. “Economists still worry recession could be on the way. But here's how a soft landing may still be possible” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/16/economists-worry-about-a-recession-but-a-soft-landing-may-be-possible.html
4. “US data continue surprising to the upside” FXStreet, 16 Feb. 2023, https://www.fxstreet.com/analysis/us-data-continue-surprising-to-the-upside-202302160746
5. “Will recession slam the stock market? Here are 3 economic ‘landing' scenarios” MarketWatch, 18 Feb. 2023, https://www.marketwatch.com/story/will-recession-slam-the-stock-market-what-investors-need-to-know-as-the-fed-pilots-the-economy-into-a-slowdown-2afda6df
6. “An economy in flux | Thebrightonblade.com” Brighton Standard-Blade, 14 Feb. 2023, https://www.thebrightonblade.com/stories/an-economy-in-flux,421045
