Key Takeaways

  • Our quantitative models are signalling a high risk of

    a recession in the medium term (12-24 months).

  • But these require careful interpretation given the

    receding risk in the near-term models, especially

    over the three- and six-month horizons. This has

    been primarily driven by the repricing of recession

    risks in financial markets.

  • Other typical recession indicators, like the yield

    curve and the Conference Board’s Leading

    Economic Indicator (LEI), are still flashing red.

  • The loosening in the US labour market has so far

    been benign, with declining vacancies rather than

    higher unemployment helping lower inflation

    pressures. But this may prove temporary. The final

    leg of returning inflation to target could require a

    move upward in unemployment.

  • Corporates may well cut back on hiring amid

    increasing pressure on margins due to elevated

    wage growth and higher financing costs.

  • Meanwhile, consumers also face growing

    headwinds with depleted savings piles, the

    resumption of student loan repayments and higher

    debt servicing costs resulting from rates remaining

    higher for longer.

  • Therefore, while the potential for a soft landing has

    increased, we continue to see an eventual mild

    recession as the most likely eventual outcome for

    the US economy.


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