Economy headed for 'very short recession’: Conference Board

Dive Summary:

• DThe economy is headed for a brief, near-term recession amid credit tightening, falling stock prices and declining new orders for manufactured goods, the Conference Board said on Monday.
• After exceeding projections this year, US Gross Domestic Product The Conference Board said the economy would expand by just 0.8% in 2024, following a decline in its leading economic index last month.
• „The Conference Board expects higher inflation, higher interest rates and reduced consumer spending — due to pandemic costs and forced student loan repayments — to push the U.S. economy into a very short recession,” Justyna Zabinska-La Monica, senior manager at the Conference Board. For business cycle indicators, a report said.

Dive Inside:

DThe Conference Board’s LEI has fallen since December 2021, after the economy – driven largely by unexpectedly strong consumer spending – has exceeded forecasts of a recession in the past few months.

GDP growth rose to an annualized rate of 4.9% in the third quarter, albeit slowly, perhaps ending 2% in the current quarter Annual velocity, according to the Atlanta Fed.

Like many private-sector analysts, Federal Reserve economists are weighing on forecasts of a recession this year even as the central bank raises key interest rates at the fastest pace in four decades.

Policymakers, seeking to lower their target of 2% inflation, have raised the federal funds rate from near zero to 5.25% to 5.5% from March 2022, the lowest in 22 years.

„Conditions are in place for inflation to return to target, and the harshest blows of monetary and fiscal tightening are behind us,” David Mericle, chief U.S. economist at Goldman Sachs, said in a statement. The US economy will It will grow by 2.1% next yearAnd faces only 15% odds of falling.

Recent reports of weakening retail sales, slowing hiring and easing price pressures suggest the central bank could achieve a so-called soft landing — returning inflation to 2% without triggering widespread job losses or a recession.

As the Fed stops tightening, it will start cutting the federal funds rate in the second quarter of 2024. Decreases by a full percentage point Moody’s Investors Service said in a report on Monday that it will be between 4.25% and 4.5% by the end of the year.

Inflation “will fall to the central bank [2%] The end-2024 target is supported by a cooling labor market and continued decline in wage growth,” Moody’s said.

JPMorgan Chase predicts the central bank will begin cutting borrowing costs in the second half of next year, while Goldman Sachs says the first cut will occur in the final quarter of 2024.

Top executives at companies in the Standard & Poor’s 500 index are clearly looking Progress in reducing price pressure. They cited inflation during recent quarterly earnings calls at the lowest level since Q2 2021, FactSet reported.

And, according to FactSet, S&P 500 companies have had five straight declines calling for a „recession” in earnings calls.

Yet the economic outlook is bleak. Consumers, who fuel nearly 70% of economic growth, are showing signs of alarm.

Amid high borrowing costs, average utilization rates among consumers Any type of loan The New York Federal Reserve described the results of its Credit Access Study as last year’s decline from 44.8% in 2022 to 41.2% and 45.8% before the pandemic.

Also, „there was a slight increase in the subjective financial vulnerability of U.S. households, with the average probability of having $2,000 in unexpected need within the next month,” the lowest level since its inception. The data series from 10 years ago, the New York Fed said.

According to the New York Fed, only 65.8% of respondents said they would be able to withdraw $2,000 within the next month, up from 67.5% last year.