A US recession looks almost certain over the next 12 months, according to new Bloomberg Economics model predictions, dealing a severe blow to President Joe Biden’s economic messages ahead of November’s mid-term elections.
The latest recession probability models from Bloomberg economists Anna Wong and Eliza Winger predict a greater likelihood of a recession in all time periods, with the 12-month estimate for an economic decline until October 2023 reaching 100% from 65 % probability for the comparable period during the previous update of these economic models.
The prediction will be unwelcome news for Biden, who has repeatedly stated that the US will avoid a recession and that any potential downturns will be “very slight” as he tries to reassure Americans that the economy is on a solid footing under his stewardship. , points out from the agency “Bloomberg”, reports BNR.
However, tightening financial conditions, persistently high inflation and expectations of further interest rate hikes by the Federal Reserve increase the risk of a contraction in US GDP.
The model developed provides more reliable indications of a recession than other forecasts. A separate Bloomberg poll of 42 economists suggests that the likelihood of a recession in the next 12 months is now 60 percent, up from 50 percent the month before.
The forecasts are in stark contrast to Joe Biden’s optimistic tone. The president focused on strong employment growth as he fought to help Democrats retain a majority in the House and Senate in the mid-term elections in three weeks.
But inflation, nearing a four-decade high, is hurting Democrats’ prospects in the upcoming elections, with polls showing the economy being the primary concern of voters.
Bloomberg’s economic model uses 13 macroeconomic and financial indicators to predict the likelihood of an economic recession over time horizons of one month to two years.
While the chance of a recession within 12 months has reached 100%, the likelihood of a recession hitting the United States first also increases according to this model. The model predicted the probability of a recession within 11 months to 73% (from 30% previously) and the probability of a 10-month GDP contraction rose to 25% from zero percentage points.
The outlook for deterioration is due to a generalized deterioration in the economic and financial indicators used as input for the model, Bloomberg Economics said.
