Janney Montgomery Scott’s investment strategist Mark Luschini looks ahead to the Fed’s rate decision on “Maria Bartiromo’s Wall Street”.
According to a new survey by the National Association for Business Economics, an overwhelming majority of business economists still see a 50:50 chance that the US economy will fall into recession within the next year.
About three quarters of respondents, 71%, said the likelihood of an economic downturn within the next 12 months was about 50% or less. That marks a significant reversal from April, when about 44% of respondents forecast a more than 50% chance of a recession over the course of the year.
More than a quarter of economists estimate the probability of a downturn to be 25% or less.
“A majority of panelists are more confident about the economy next year as they decrease the likelihood of a recession,” said Carlos Herrera, chair of the NABE Business Conditions Survey and chief economist at Coca-Cola North America.
MAJORITY OF WORKERS REGRET ABOUT REQUIRING DURING ‘BIG RESIGNATION’‘
Construction workers stand in front of the Manhattan skyline and the Empire State Building in Brooklyn on January 24, 2023. (Ed Jones/AFP via /Getty Images)
The uptick in sentiment reflects rising sales and earnings over the past three months. The survey shows that the percentage of respondents reporting increasing sales continued to be higher than the percentage of respondents reporting decreasing sales. Companies are also more optimistic about future earnings over the next three months.
The economists also noted that material costs continued to fall as summer began.
AMERICANS EXPECT HIGH INFLATION TO CONTINUE IN THE LATEST NEW YORK FED SURVEY
Finally, companies reported that wages at their companies were flat in the second quarter for the first time since 2021. Rising wages were a key component of rising US inflation as companies competed to hire a limited workforce.
“The July 2023 NABE Business Conditions Survey results reflect an economy of rising sales and profits as material costs fall and wage stabilization proves less difficult,” NABE President Julia Coronado said in a press release.
A customer shops for meat at a Safeway in San Rafael, California on April 12, 2023. (Justin Sullivan/Getty Images)
The poll, which was conducted between June 30 and July 12 and includes responses from 52 NABE members, comes against a backdrop of signs of cooling in inflation.
The Labor Department reported in early July that the Consumer Price Index (CPI), a broad measure of the price of basic necessities like gasoline, groceries and rent, rose 0.2% mom in June. Prices rose just 3% year over year, the lowest in two years.
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The slow but steady decline in inflation, coupled with the surprising resilience of the job market, has raised hopes among some economists that the US can successfully avoid a recession this year.
“I feel like we’re on the golden road to avoiding a recession,” Austan Goolsbee, chairman of the Chicago Federal Reserve, said earlier this month.