They estimate that the US GDP will fall in the next two quarters

Forecasters now expect US economic activity to contract during consecutive quarters in the middle of this yearas the Federal Reserve’s sharp interest rate hikes reverberate more broadly throughout the economy.

Forecasts indicate that gross domestic product would fall at an annualized rate of 0.6% in the second quarter and 0.3% in the third as consumer spending stagnatesdeclining business investment and Industrial production weakens, according to a Bloomberg survey of 73 economists conducted January 13-18.

The results of the survey estimate the probability of a recession for the next year is 65%.

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“Recession concerns are growing in the US as the the Federal Reserve continues to increase interest ratessaid James Knightley, ING’s chief international economist. “With more companies taking a defensive stance, We expect to see aggressive cuts in hiring and investment plans”.

Economists forecast that the unemployment rate rise from a five-decade low of 3.5% to almost 5% by the end of the year as companies reduce staff to control costs. Payrolls are expected to falln 45,000 per month on average in the second quarter and then 104,000 in the period from July to September.

That would be a big change for a job market that has so far shown few signs of weakening. Users added nearly a quarter million jobs in December and unemployment insurance claims remain historically low.

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In fact, according to the Bloomberg survey, wages are still expected to grow at a solid pace for much of this year. Although the economists revise your expectations for the price index downward of personal consumption spending, the Fed’s preferred gauge, and the consumer price index, inflation is expected to end the year well above the Fed’s 2% target.

So while price pressures are expected to cool off this year, the Fed is expected to keep the your benchmark interest rate for quite some time. Economists surveyed see the fed funds rate in a range of 4.75%-5% through the end of the year.

Estimates of the so-called basic PCE price index, that exclude volatile food and energy components, were little changed from the previous month’s survey. The indicator is expected to rise 2.5% year-over-year by mid-2024.


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