Bloomberg Economics’ latest models foresaw the possibility Economic recession in the United States In 12 months, Bloomberg experts Anna Wong and Elisa Winger see a greater probability of recession on all time frames, for the next year ending in October 2023, bringing the probability of deflation to 100%, compared to 65% of the same. period of the previous update.
A recession in the United States will surely be a major blow to President Joe Biden’s economic message ahead of November’s mid-term elections.
The outlook will be unwelcome news for Biden, who has repeatedly stated that the US will avoid a recession and any contraction would be “very slight” as he tries to reassure Americans that the economy is under his stewardship there.
But tightening financial conditions, persistent inflation and expectations that an aggressive Federal Reserve will push forward with interest rate hikes are increasing the risks of deflation.
The model was more confident of a recession than other forecasts. A separate Bloomberg survey of 42 economists predicts a 60% chance of a recession in the next 12 months, up from 50% the previous month.
The forecast stands in stark contrast to Biden’s upbeat tone. The president focused on strong employment growth during his campaign to help Democrats retain a majority in both the House and Senate in the elections in 3 weeks.
But inflation, which was near a four-decade high, weighed on Democrats’ election prospects as polls suggest the economy is the most important issue for voters.
The Bloomberg Economics model uses 13 macroeconomic and financial indicators to predict the possibility of a downturn over a one-month to two-year horizon.
While the probability of a recession in 12 months has reached 100% according to the model, the odds of a recession also increase earlier, as the model predicts the probability of a recession in 11 months to 73%, compared to 30%, and increases the probability of 10 months at 25% of 0%.
Bloomberg Economics found that the deterioration in expectations was caused by a widespread deterioration of the economic and financial indicators used as input for the model.
