Inflation is one of the reasons investors and banks are predicting a U.S. recession in the near future. | Unsplash
Inflation is one of the reasons investors and banks are predicting a U.S. recession in the near future. | Unsplash
When it comes to what people think about the prospect of America sinking into recession, it’s more a question of when than if.
A Bloomberg Markets Live survey, conducted from March 29 to April 1, shows that 48% of investors expect the country to fall into recession next year, while 21% expect the downturn to happen in 2024, and 15% of the 525 respondents expect the recession to come as early as this year, a World Economic Forum report says.
President Joe Biden’s policymaking is cited as the main cause.
"PPI is in at 11.4% for March, this forecasts an even higher number of future inflation and certainly the beginning of a recession,” Cook County Commissioner Sean Morrison tweeted recently. “The reckless Biden executive orders and policies issued since day one, are the main contributors to most of this. #selfinflicted”
On Tuesday, the Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) data for the 12 months ending March 2022. The data showed an 8.5% annual increase for all items, which is the largest increase in over 40 years, since 1981.
Mortgage rates are also inching upward, making it more expensive to borrow money. Current mortgage rates in North Carolina are 5.20% for a 30-year fixed mortgage, and 4.37% for a 15-year fixed mortgage, as reported by Bankrate.com on April 13, 2022.
The gloomy forecast about a prospective recession goes beyond individual investors. Deutsche Bank was the first major Wall Street firm to predict a recession on the horizon for the U.S.
"We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession," a Deutsche Bank economics team led by Matthew Luzzetti wrote in a recent report that was cited by Fox Business. The economists forecast a mild recession that will begin in the final quarter of next year and continue into the first quarter of 2024, with unemployment peaking above 5%.
Bank of America is another firm that has climbed aboard the recession-prediction train. In an analysts’ note to clients, Bank of America chief investment strategist Michael Hartnett said that surging consumer prices, combined with an increasingly hawkish central bank, could precipitate an economic downturn.
"Inflation shock worsening, rates shock just beginning, recession shock coming," Harnett warned.
History suggests the current oil shock raises the probability of a U.S. recession in the near future. As opinion contributor Liz Peek pointed out in The Hill, "The last four recessions have been preceded by sharp hikes in energy prices,” adding that "$120 oil is a red flag." Peek underscores what many economists already know: the Federal Reserve's only option in the effort to curb spiraling prices is to hike up interest rates in order to slow growth.
In a recent Wall Street Journal poll, which was conducted March 2-7 and surveyed 1,500 general election voters nationally, 63% disapproved of Biden’s handling of inflation. Additionally, by a wide margin, respondents chose Republicans over Democrats as better able to handle rising prices.
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