Is a recession coming in 2022? This article provides assessments and opinions on whether the U.S. is headed for a recession. It answers the question “What are the chances of a recession in the U.S.” The Bureau of Economic Analysis (BEA) reported on Wednesday that the US economy declined during the first quarter at a somewhat quicker rate than anticipated. The report increases concerns that a recession may be approaching after one-quarter of negative economic growth. The U.S. Bureau of Economic Analysis (BEA)’s third and final adjustments for the quarter show that real gross domestic product fell at an annualized pace of 1.6 percent from January to March.
Prior to that, the April advance estimate revealed a decline of 1.4 percent. That was changed to a decline of 1.5% last month. The first-quarter GDP performance contrasted with the fourth quarter of 2021 when the economy expanded at a rate of 6.9 percent over the previous quarter. The BEA observed that the first-quarter GDP performance included some unquantified effects from the pandemic and the Omicron variant spike.
However, the beginning of Russia’s invasion of Ukraine in the first quarter of 2022 caused economic shockwaves to spread throughout the worldwide supply chain, as well as the food, financial, and energy sectors. Due to continued supply chain issues, rising labor and material costs, and surging oil prices, domestic US inflation has reached levels unseen in decades.
Even though the formal definition of a recession is two-quarters of declining GDP, this is hardly a hard-and-fast rule, especially for those who make it. A recession is defined by the National Bureau of Economic Research as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The National Bureau of Economic Research, the authority on US recessions, takes into account a variety of indicators in addition to GDP performance. On July 28, an estimate of how the second quarter’s GDP performed will be made public.
The Chances of a Recession in the U.S.
Although there is a wide range of predictions, analysts typically perceive a greater likelihood that the US economy would contract. The following are assessments of U.S. recession probability and U.S recession risk by leading experts. Some of the largest banks in the world have given their opinions about whether the U.S is headed for a recession.
Low Chance
Deloitte: According to Daniel Bachman, who oversees the U.S. economic forecasting team at the consulting firm, a recession is “less likely than some analysts would have you believe,” with a 15% possibility.
Pantheon Macroeconomics: Ian Shepherdson, the research firm’s chief economist, claims that if a recession occurs, it will be “brief and mild” and that the firm’s “base case” continues to be that one is improbable.
Morgan Stanley: “Accelerating inflation has been a common precursor to recessions,” says Ellen Zentner, the investment bank’s senior U.S. economist. However, despite high and growing prices, the bank’s models predict a 30% chance of a recession within the next year.
Citigroup: Citigroup economists, led by global chief economist Nathan Sheets, anticipate a slowing but not a contraction of the U.S. economy, yet “we see recession probabilities as appreciable and rising.”
A Good Chance
JPMorgan Chase: Under the leadership of chief economist Bruce Kasman, the largest bank in the United States has increased its projected probability of a recession over the next 12 months to an “uncomfortably high” 35 percent. They conclude that the risks are “skewed decisively to the upside on inflation and to the downside on growth.”
TD Bank: Beata Caranci, the chief economist of the Canadian bank, and the economics team do not anticipate a U.S. recession, but they acknowledge that “with growth close to stall speed, there is a very thin margin for error if another shock hits economies.”
Credit Suisse: According to the team led by Jeremy Schwartz, the Swiss bank’s director of U.S. economics, the U.S. economy is “on the edge of a recession” after significant revisions to its estimates, but there are “buffers” that should prevent the economy from “spiralling into a broader downturn.”
Oxford Economics: According to Kathy Bostjancic, chief U.S. economist at Oxford Economics, the Federal Reserve has a “fighting chance” to control inflation without sparking a recession. She has lowered her growth projections since they are “precariously close to tipping into a recession by mid-2023,” according to her.
On the Fence
Bank of America: According to Ethan Harris, a global economist at the bank, growth would decline to practically zero in the second half of 2023 with “only a modest rebound” in 2024 and a 40% risk of an actual recession.
S&P Global Ratings: According to Beth Ann Bovino, the chief economist for the United States, “economic momentum will likely protect the U.S. economy from recession in 2022,” according to S&P Global Ratings. She estimates that there is a 40% chance of a recession, adding that “it’s hard to see the economy walking out of 2023 unscathed.”
Goldman Sachs: Although the Wall Street behemoth’s analysts have increased the likelihood of a recession, they believe it is still possible to avert one (via “a feasible though difficult path”). The likelihood of a recession over the next two years has increased from 35% to just under 50%, according to David Mericle and Ronnie Walker.
Fitch Ratings: In the second through fourth quarters of next year, the Fitch Ratings team, led by chief economist Brian Coulton, anticipates that economic growth would decelerate to only 0.1 percent per quarter, putting the economy “perilously close to the risk of technical recession.”
Certain
Berenberg: According to analysts at the German bank, under the direction of chief economist Holger Schmieding, the U.S. GDP would contract in the first three quarters of 2023 but only by a “relatively modest” 0.4 percent for the full year. “With luck, the recession will be a shallow one,” they write.
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FAQs
The U.S. Bureau of Economic Analysis.
The National Bureau of Economic Research.
It defines a recession as a significant decline in economic activity that is spread across the economy and lasts more than a few months.
The great depression from 1929-1939.
