Major Bank That First Predicted US Recession Says New Developments Mean It Will Be Even 'More Severe'
A major global bank that predicted the U.S. was heading for a recession has made an even bleaker forecast for the nation’s economic future.
Deutsche Bank said Friday that the recession it predicted is coming sooner and will hit harder, according to Business Insider.
“More than two months ago, we forecasted that the US economy would tip into a recession by end-2023,” Deutsche’s team, led by chief US economist Matthew Luzzetti, said in a note issued by the German bank.
“Since that time, the Fed has undertaken a more aggressive hiking path, financial conditions have tightened sharply, and economic data are beginning to show clear signs of slowing,” the note said, referring to the Federal Reserve’s action to increase interest rates, which was taken in an attempt to lower inflation.
REPORTER: “Economists are saying a recession is more likely than ever.”
BIDEN: “C’mon, don’t make things up. Now you’re sounding like a Republican politician. I’m joking that is a joke.”
— Benny Johnson (@bennyjohnson) June 20, 2022
“In response to these developments, we now expect an earlier and somewhat more severe recession,” the note said.
The note predicted the unemployment rate will jump by almost two percentage points
The note predicted that the economy could shrink at an annualized rate of 3.1 percent in the third quarter of 2023, and then by 0.4 percent in the fourth quarter, Deutsche said. In the past, it had predicted the economy would start to shrink in the fourth quarter.
Economic growth for 2023 will be 0.7 percent, the bank predicted.
Deutsche Bank predicted that unemployment, which is hovering around 3.6 percent, will reach 5.5 percent in 2024.
Deutsche Bank is not alone in its forecasts of hard times.
Goldman warns the risk of a US recession has grown more likely, and have downgraded their GDP growth forecasts for the economy https://t.co/AEx8KiBCav
— Bloomberg (@business) June 21, 2022
Goldman Sachs on Monday doubled the odds of a recession in the next year, from 15 percent to 30 percent. It said there is a 50 percent chance of a recession over the next two years.
Bank of America Global Research now puts the odds of an economic slump at 40 percent next year, according to Fox Business.
“Our worst fears around the Fed have been confirmed: They fell way behind the curve and are now playing a dangerous game of catch up,” analysts led by Ethan Harris wrote. “We look for GDP growth to slow to almost zero, inflation to settle at around 3 percent and the Fed to hike rates above 4 percent.”
“In the spring of 2021 we argued that the biggest risk to the U.S. economy was a boom-bust scenario,” Harris wrote.
“We worried that the Fed would take too long to put the brakes on. We asked, if the fiscal authorities are doing so much stimulus, why does the Fed need to add fuel to the fire with unusually late policy normalization? Over time the boom-bust scenario has become our baseline forecast,” he wrote.
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