US: How much of a recession risk?

In Short

Over the last weeks, global growth prospects have worsened significantly. While the direct fallout of the war in Ukraine on the US is relatively limited, high fuel prices dampen consumption. In this context, the Fed vows to fight inflation by raising rates at a speed not seen in the last 40 years.

Highlights:

  • Persistent inflation overshoots and the Fed’s aggressive normalisation are weighing on the US outlook. After expanding by just above 2% this year, we expect that in 2023 GDP will grow by 0.9% only, with a high likelihood of a slight quarterly contraction during H1. Risks are tilted to the downside.
  • Our forecast carries an around 45% risk of a recession next year. Healthy private sector balances may partially offset the impact of tighter financial conditions. Yet, high debt and weak fiscal support may burden the recovery.
  • In our baseline scenario, evidence of weakening activity and recession risks will ultimately moderate the Fed’s policy tightening. We see the effective fed funds rate ending the year at 3.1% and peak at 3.4% in Q1 2023.

Read the full publication below

Focal Point I US: How much of a recession risk?
Picture

© Generali Investments, all rights reserved. This website is provided by Generali Investments Luxembourg S.A. (Generali Investments) and is considered as a marketing communication and financial promotion related its products and services. This website may contain information related to the activity of the following companies: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (including Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S.p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* and among its subsidiaries Global Evolution Asset Management A/S - including Global Evolution USA, LLC and Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC as well as Generali Investments CEE. *Includes Conning, Inc., Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc., Goodwin Capital Advisers, Inc. (collectively, “Conning”).