The U.S. was supposed to be in recession by now, if you asked economists a year earlier. Now, a majority of economists think a recession can be avoided.
Nearly four-fifths of economists polled by the National Association of Business Economists say a there’s a 50% chance or less of a recession within the next year. Only 18% think a downturn is likely.
The U.S. economy has shown remarkable resilience over the past year despite rising interest rates. Higher borrowing costs usually depress growth, but gross domestic product actually surged 4.9% in the third quarter.
What’s helped lately is a slowdown in inflation and the end of supply shortages that bedeviled the U.S. and global economies in 2021 and 2022.
Fewer firms are passing on their own price increases to customers in order to try to boost sales.
“The panel suggests that inflation is continuing to ease, which is good news for consumers,” said Carlos Herrara, chief economist at Coca-Cola North America
KO,
and chairman of the NABE survey.
Not all the news was good.
More businesses said sales had slowed in the past few months and that profit margins were falling. For the first time in three years, more economists also said employment was falling instead of rising.
The survey “results suggest a more challenging business environment as the economy slows,” said NABE President Ellen Zentner, also the chief U.S. economist at Morgan Stanley
MS,
The biggest challenge for companies right now are high interest rates, the survey said.
The Federal Reserve has jacked up a key short-term U.S. interest rate to a top end of 5.5% from near zero in the spring of 2022 to try to tame inflation.
The Fed plans to keep rates high for quite some time to make sure inflation returns to low pre-pandemic levels of 2% or less. Senior central bank officials meet this week, but they are expected to leave rates unchanged.
Read the full article here
