Financial experts are warning that America is on the path to recession. An index of economic indicators, which predict the financial future, are in decline and have been for over a year. Justyna Zabinska-La Monica, business manager at Conference Brand, which makes predictions in line with Wall Street forecasts, said seven of their ten indicators dropped in July, suggesting that “economic activity is likely to decelerate and descend into mild contraction in the months ahead.”
Zabinska-La Monica added that rising interest rates, low consumer confidence, and decreasing hours worked in manufacturing have fueled the decline.
According to the strict definition of a recession – a significant reduction in economic activity throughout the economy and lasting for months – the United States already entered one last year after two consecutive quarters of economic downturn. Still, the general feeling on Wall Street is a 66% chance of undeniable recession by the end of 2023.
This is backed up by a Wall Street Journal survey in July that found 54% of American economists agree that tough times may be ahead. However, economics is unpredictable, so not everyone agrees and not all indicators point in the same direction.
GDP Now, part of the Federal Reserve Bank of Atlanta, is a forecaster that describes itself as “best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter.” Its latest estimate, dated August 24, is a GDP growth of 5.9%.
Michael Feroli, chief economist at JPMorgan Chase, said trying to predict the future of an economy is a “mug’s game.” He added, “Recessions are nonlinear events, and most economic models are linear. We believe recession risks were, and continue to be, elevated.”
Consumers don’t appear overly concerned either way, as leisure spending is on the rise. In New York City, for example, bars and restaurants reported a profit upswing of more than 11% in July and 10% in June.