Why a recession is now likely
Restoring AmericaDec 08, 2022
Economists polled by Reuters predict that the US economy is heading into a short and shallow recession in the coming year, unanimously expecting the US Federal Reserve to go for a smaller 50 basis point interest rate hike on Dec. 14.
Eight-four economists were polled between Dec. 2-8. Of the 45 that provided GDP forecasts, 27 predicted a contraction for two straight quarters or more at some point in 2023. Out of 48 that were asked, 35 said any recession would be short and shallow, eight said long and shallow, one predicted short and deep, and four said there wouldn't be one at all.
It's very rare that prominent economists agree on a policy matter as important as interest rates, yet with wage inflation simply being too high there are several signs that a recession is looming. The personal saving rate is too low and savings are being used to finance current consumption alongside slowing factory activity. A hard landing is clearly coming for America.
Until now, the consensus economic view hasn't forecast a single US recession since records began in 1970. Within the market, it's not the inevitable that happens but rather the unexpected, and with the precedent of economists consistently being wrong surrounding recessions, maybe it's a sign that there won't be an economic crisis in 2023 after all.
There's an 8% chance that the first US recession before 2032 will lead to a depression, according to the Metaculus prediction community.