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The US is borderline between recession and growth

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Analysts revise forecasts after inflationary pressures recede

Οριακ μεταξy yφεσης και ανàπτυξης οι ΗΠΑ

Analysts who had expected a bumpy landing due to aggressive interest rate hikes are being forced to revise their predictions of a US recession as inflation recedes and the US economy remains resilient.

Deutsche Bank's vice president of analysis, Peter Hooper, and Fannie Mae's chief economist, Doug Duncan, think the US economy is teetering on the brink of a recession. and a soft landing with positive growth, but still believe that the recession scenario is more likely.

Nomura Securities International chief economist Aichi Amemiya is sticking with his forecast for a recession, but as he tells Bloomberg “it's starting to become a very marginal estimate.” The same sentiment is reflected in the Bloomberg poll of economists in July, where forecasts for US growth were upgraded for the second and third quarters (to +1.5% and +0.5% respectively). But participants still see a 60% chance that the US economy will fall into recession in the next 12 months.

As Fannie Mae's Duncan points out, new home starts and home prices were stronger than expected, supporting the economy. Amemiya points to strong new car sales figures.

Paradoxically, Hooper attributes the decline in recession risk to the Federal Reserve's sharp interest rate hike. As he explains, monetary tightening has helped subvert inflation expectations, increasing the chances that prices will fall without the need for a significant contraction of the economy. Indeed, economists polled by Bloomberg are becoming more optimistic as inflation eases. The personal consumption expenditure price index – which the Fed prefers to “look at” for inflation – is expected to rise 2.2% in the final quarter of 2024, according to the survey. Last month economists expected a 2.3% increase.

Structural inflation, which excludes food and energy, is expected to moderate in the first half of next year more than forecast last month. Economists are also predicting that the consumer price index will fall faster by the end of next year.

Data showing that US inflation fell to at least a two-year low in June led many economists and traders to bet that the Fed's rate hike next week will be the last of the cycle.

Source: www.kathimerini.com.cy

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