The US is on course for a recession in the next two years, predicts a new survey of economists at big banks.

According to a Wall Street Journal survey of economists at 23 large financial institutions that do business directly with the Federal Reserve, more than two-thirds expect a recession in 2023. A further two said there would be a recession in 2024.

While Europe was hit heavily in 2022 as a result of inflation, energy and supply chain issues caused by Russia’s ongoing illegal invasion of Ukraine, the US was mostly resilient through the year as the Federal Reserve raised rates to curb inflation.

However, the survey of ‘primary dealers’ (a collection of trading firms and investment banks including Barclays and Bank of America) identifies red flags of a looking recession including a housing market in decline and banks tightening their lending standards.

The Federal Reserve increased rates seven times in 2022 – pushing its benchmark from 0-0.25 per cent to 4.25-4.50 per cent, representing a 15-year high. The majority of survey respondents expect that the higher rates of inflation will push unemployment from November’s low of 3.7 per cent to 5.5 per cent, leading to millions of job losses. Most respondents also expect the US economy to contract in 2023.

Share Story: